EZCORP Inc. and Alpha Holding SA de CV agreed to modify certain existing agreements relating to the former's sale of its Grupo Finmart business to AlphaCredit in September 2016.
As part of the original agreements, Grupo Finmart issued two promissory notes to EZCORP for about $61 million in principal, with $52 million being payable in U.S. dollars and an amount equivalent to $9 million being payable in Mexican pesos. The principal amount was to be repaid in three annual installments on the first, second and third anniversaries of the deal's closing, with interest being payable quarterly.
Under the modified agreement, the $61 million principal amount, plus accrued interest, will be paid on a monthly basis between Sept. 27, 2017, and Sept. 27, 2019. The aggregate principal amount still remains repayable within the original time frame, and the effect of the restructuring is to shift payments from the earlier portions of the period to the later portions of the period.
As consideration for the payment restructuring, the annual interest rate was increased to 10% from 4% for the dollar-denominated note and to 14.5% from 7.5% for the peso-denominated note. In addition, EZCORP will receive an additional deferred compensation fee of $14 million, payable $6 million on Sept. 27, 2019, $4 million six months later and $4 million six months after that.
Upon any prepayment of the notes, Grupo Finmart must pay an amount equal to all remaining interest payments that would otherwise be due through the end of the term, and the deferred compensation fee, in addition to all outstanding principal and accrued interest. The deferred compensation fee will be reduced to $10 million if the notes are prepaid in full on or prior to June 30, 2019.
The amended notes are now guaranteed by AlphaCredit.
AlphaCredit has terminated EZCORP's indemnification obligations under the original purchase agreement relating to the Grupo Finmart sale, and terminated all existing indemnity claims. It has also released to EZCORP $4.1 million that was being held in escrow pending resolution of indemnification claims.
AlphaCredit has paid EZCORP $34 million in connection with the Grupo Finmart sale since the transaction closed.