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Penson Worldwide, Inc. (NASDAQ: PNSN) today announced that it has continued to take major steps forward with its previously announced strategic initiatives to strengthen its balance sheet, increase liquidity and improve performance in the face of challenging industry conditions.
The Company announced that entities holding more than a majority of Penson’s $281 million parent company long-term funded debt have agreed to a restructuring support agreement providing for the reduction of that debt through an Exchange Offer for new debt and equity securities. The proposed transactions are subject to approval and acceptance of debt holders, among other parties, and other conditions. The Company intends to close the proposed transactions as soon as practicable.
The Company also reported results for the fourth quarter ended December 31, 2011, which included a non-cash impairment of all the goodwill associated with previous acquisitions that became part of Penson Financial Services, Inc. (PFSI) and its Futures Division. This impairment had no effect on regulatory capital.
Debt Reduction & Exchange
“We are pleased to have reached this agreement with owners of a majority of our long-term funded corporate debt – a move that we expect will significantly strengthen the Company’s financial position and core business,” said Philip A. Pendergraft, Chief Executive Officer.
“Under the plan, we would eliminate approximately $176 million of debt and $30 million of annual cash interest expense, increase equity at our parent company, and potentially realize a significant one-time gain as a result of this exchange. Combined with our cost savings, which are just beginning to be realized, our plan is to get Penson to be as close as possible to break even on a cash basis in the second half of 2012.
“While we are current with all our debt and interest payments, we believe this is the best way to speed the transition to our new model in the face of today’s lower trading volumes and prolonged low interest rates.”