UPDATE: PNSN Sells ‘Assets’ Including Segregated Funds

UPDATE 5/30-1100EDT: PNSN now trading at 0.20/share with no volume to speak of.
FORM 8k Filing 29-May-2012 - Entry into a Material Definitive Agreement, Costs Associated with ExitOn May 28, 2012, Penson Financial Services, Inc. (“PFSI”), the U.S. broker-dealer subsidiary of Penson Worldwide Inc. (the “Company” or “we”), entered into an Asset Purchase Agreement (the “APA”) with Knight Execution & Clearing Services LLC, a Delaware limited liability company (the “Purchaser”), pursuant to which the (i) Company will sell certain assets of PFSI’s futures clearing business (the “FCM Business”), including but not limited to, customer contracts, segregated customer account assets, assets relating to the foreign currency exchange business, membership seats and licenses for clearing exchanges, and other related assets to the Purchaser; and (ii) the Purchaser will assume, subject to specified exceptions, certain liabilities and obligations under customer contracts in the FCM Business (the “Sale”).

In consideration for the Sale, the Purchaser agreed to make an initial payment of $5.0 million in cash to PFSI (the “Initial Purchase Price”). A portion of the Initial Purchase Price will be held back in respect of any exchange membership and other assets that are not transferred at the Closing, provided that such holdback shall not reduce the amount paid at closing to less than $2.5 millionAt this time, the Company is not able in good faith to estimate (i) the total amount or range of amounts of costs expected to be incurred in connection with the Sale, or (ii) the total amount or range of amounts of the charge that will result in future cash expenditures, if any, that might be required in connection with the Sale.

In short, PNSN is functionally bankrupt, but will do everything it can to delay the public bankruptcy filing, so that it can keep the clock running towards fulfilling statutory time limitations which will prevent court-ordered reversal of certain payments (a.k.a. claw-backs) including bonuses and commissions paid to officers and employees of the company, external payments to vendors and partners, and perhaps ‘special dividends’ or other payments made to preferred investors.  Plainly stated, the money they are spending now is the ‘good money’ spent to buy time, so that the ‘bad money’, i.e. preferential payments to some entities, will not be re-assessed by the court.  Hence the term, “throwing good money after bad.” 

UPDATE 5/24-1500EDT: PNSN now trading at 0.30/share with extremely low volume, and many shares offered that are not receiving bids.  High volume this morning at 0.31/share indicate that all of the institutional investors are now off the boat, clearing the way for a bankruptcy filing.

UPDATE: 5/22-1000EDT: Here it is, folks – PNSN failed to satisfy its restructuring agreement, and that news is now public with the Form 8-K filed yesterday (see below). The only money they have left is customer money, which they just “loaned” from their Broker/Dealer division to their back-end brokerage division for continued operations: they are “continuing their efforts complete strategic transactions” - to pay out to clients who have trades in play…in other words, “we’re doing our best, but no guarantees, Mr. Customer.”  This is the ‘Lit Fuse’ on the next financial bomb to go off here in the US.

Penson Worldwide, Inc. [PNSN], Form 8-K, 21-May-2012 (biz.yahoo.com)

Entry into a Material Definitive Agreement, Termination of a Material Definitive Agreement

Item 1.01 Entry into a Material Definitive Agreement. On May 15, 2012, Penson Worldwide, Inc. (the “Company”) reached an agreement with Financial Industry Regulatory Authority (“FINRA”) regarding the Company’s request to withdraw regulatory capital via an intercompany loan between the Company and Penson Financial Services, Inc. (“PFSI”), the Company’s U.S. broker-dealer subsidiary. Under the agreement, FINRA granted permission for an intercompany loan of $5.5 million from PFSI to the Company, which was used to pay interest on the Company’s outstanding 12.50% Senior Second Lien Secured Notes due 2017 (“Senior Second Lien Notes”). The Company agreed to continue its efforts to complete strategic transactions, which would include PFSI’s securities and futures clearing businesses. As previously announced, the Company is actively engaged in advanced discussions regarding strategic transactions.
Item 1.02 Termination of a Material Definitive Agreement As disclosed in a Current Report on Form 8-K filed on March 14, 2012, which is incorporated herein by reference, the Company and certain of its subsidiaries entered into a Restructuring Support Agreement (“RSA”) dated March 13, 2012 with
(i) the holders of a majority of its Senior Second Lien Notes, (ii) the holders of over 70% of its unsecured 8% Senior Convertible Notes due 2014, and
(iii) Broadridge Financial Solutions, Inc., which set forth the terms of a proposed exchange offer to restructure the Company’s outstanding indebtedness. On May 17, 2012, the RSA was terminated automatically pursuant to its terms as the Company did not launch the proposed exchange offer as contemplated under the RSA. Nonetheless, the Company intends to recommence negotiations with its debt holders to seek alternative means to restructure the terms of its outstanding indebtedness. See the discussions under the headings “Liquidity and Capital Resources” and “Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2012 for a more complete description of the related risks associated with the foregoing.As of today’s market open, bids on PNSN are at 0.376 and falling…
Original: 5/20-1300EDT

Just in case you haven’t been paying attention, the US Financial Implosion continues. PNSN, which was an $18 stock when the economic bomb fell in 2008, is now trading for under $0.40 – yes, under 40 cents!  They may file bankruptcy at any moment…and when they do, millions more of segregated custodial funds (customer deposits, not invested funds) will again vanish, stolen by the cronies and facilitated by the courts.
JUST LIKE MF GLOBAL.

THE REPUBLIC IS DEAD.  THERE IS NO MORE RULE OF LAW.  THERE ARE NO “SAFE HAVENS” LEFT.  Get out of all markets before you lose everything… you don’t have long!

      
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2 Responses to UPDATE: PNSN Sells ‘Assets’ Including Segregated Funds

  1. LT says:

    GLCH may well be next… floundering badly. MERR is also embattled, may fail if business doesn’t pick up
    GLCH http://www.marketwatch.com/story/gleacher-company-reports-first-quarter-2012-financial-results-2012-05-03
    “The Company’s ClearPoint subsidiary experienced a number of
    issues, including covenant pressure and outright breaches,
    mismatch in loan originations and sales, and curtailment events
    that required the Company to provide payment guarantees. ”

    MERR https://www.google.com/finance?q=NASDAQ%3AMERR#

  2. LT says:

    I have been asked, “how long until they put this dog down?” My best answer is, as soon as there is no reason not to…which begs the question of how much was delivered in preferential payments, and when. Because that is the determining factor at this point.

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