Private-investment firm ComVest Group has given a direct investment to Pipeline Data Inc. that gives ComVest majority control of the processor, according to a Pipeline spokesperson.
West Palm Beach, Fla.-based ComVest will be "the controlling party going forward," states the spokesperson.
ComVest issued Quincy, Mass.-based Pipeline $15 million to restructure debt and acquire additional merchant portfolios. The firm also issued $15 million for preferred convertible stock, which is exchangeable for common stock. Once ComVest converts its shares, it will control 68% of Pipeline's common stock, according to the spokesperson.
Concurrent with the transaction, six of Pipeline's seven board members have resigned. Pipeline has formed a five-member board that includes Peter J Kight, ComVest partner and advisory board member.
Pipeline announced last week it completed financial restructuring of $37 million in convertible notes on Feb. 17 and settled a $16 million put right held by the former shareholders of Charge.com Inc. A convertible note is a debt that can be converted into stock at the option of the holder or the issuer. A put right is an option granted by a corporation to its shareholders that permits them to sell stock at a stipulated price back to the company.
Under the terms of the transaction, Pipeline restructured $37 million in convertible notes with 8% annual interest due June 20, 2010, to a $42.1 million loan with 10% interest until June 30, 2010, and 14% interest until June 30, 2011. Pipeline has the option to extend the notes until June, 30, 2012.
Additionally, Pipeline settled the put right on more than 9 million common shares, which Charge.com could have redeemed for nearly $16 million. The former shareholders of Charge.com received $2 million in cash and the return of the Charge.com name and domain rights in the settlement.
ComVest led the financial restructuring. Chare.com was a wholly owned subsidiary of Pipeline, according to the processor's Web site.