Vancouver fintech Progressa, once readying for IPO, files for creditor protection instead
A Canadian fintech firm that attracted millions of dollars from investors and said it had begun preparing for an initial public offering has filed for creditor-protection proceedings instead.
Vancouver-based Progressa, an alternative lender, filed under the Companies' Creditors Arrangement Act in late September, with court documents showing it owed tens of millions and required an immediate infusion of money.
On Thursday, some of the company's creditors will vote on a plan that would see them receive at least some of what they're owed and the company continue under new ownership. However, not everyone likes the proposal, which would see another entity linked to the current chief executive officer become Progressa's sole shareholder. Some argue it may not be the best option and has the tinge of at least a perceived conflict of interest, with some of them asking the court to postpone the meeting.
“There's tons of perceived conflict of interest all around this, and then there's very little transparency,” said Alex Conconi, founding partner of Vancouver-based Conconi Growth Partners.
The family investment office was an early Progressa investor and now stands to lose hundreds of thousands of dollars, he said. Conconi knows startups are risky.
He's not upset about losing money, but about what he called a lack of transparency around financials and the restructuring plan. “As an angel investor, we are prepared to lose money for the right reasons. We just want transparency, that's all.” (Conconi is also CEO and co-founder of LenDesk, which provided services to Progressa.)
Founded in 2013, Progressa (officially Creditloans Canada Financing Inc.) — and Capital Inc., a second company created to issue bonds to fund Progressa's consumer loans — filed for creditor protection in the Supreme Court of British Columbia on Sept. 29.
Progressa's CEO and CFO did not respond to a request for comment.
Progressa extends loans to borrowers snubbed by other lenders. The company's system gauges the creditworthiness of applicants by looking at factors other lenders sometimes ignore, like employment history and earning potential. It offers successful applicants between $1,000 and $15,000 to be repaid over six and 60 months at between 19 and 46.95 annual percentage rates. In some cases, Progressa uses the funds to pay off a customer's debt or bill directly. .
Before the North American COVID spread, Progressa was “approaching the break-even point on operational activities,” according to court documents. Things changed with the pandemic. The number of people applying for new loans dropped. Progressa's revenue fell as a result. Progressa did not see a way out of its financial bind.
Nathan Slee, Progressa's CEO, is the principal of the main secured creditor, ACF Financial Partnership. The court granted the initial order in September, and Progressa filed its proposed restructuring plan in mid-November. It would see ACF Financial G.P. Ltd. or its nominee become Progressa's sole shareholder. Slee, who took over as CEO in September 2019 after co-founder Ali Pourdad resigned, is the sole director of the proposed buyer.
Under the plan, secured creditors would be paid out over the normal course of business or as negotiated between the companies. The unsecured creditors, who are owed a total of about $1.7 million, will receive a portion of a $250,000 pot. Bondholders can decide whether to be paid out 35 cents on the dollar, or the full amount they're owed over five years.
The connection between Slee and the proposed buyer has raised some eyebrows. “Clearly, Nathan sees opportunity here, and has since he got involved,” said Conconi. Yet, “there's been no market test” to see if this is the best deal for all creditors, he said.
LM Credit, a Mississauga, Ont.based company that offers a similar service to Progressa, attempted to present “a superior arrangement,” it said in an email to bondholders, obtained by The Logic. In a letter dated Nov. 19, it highlighted its independence from Progressa and its management, and said it believed the bondholders' should be paid ahead of an “existing priority” on money owed to ACF. “The transaction was non-arm's length,” it said. Conconi confirmed investors did not vote on approving the ACF financing arrangement.
David Hardy, a bondholder who invested $150,000, wants the court to adjourn the planned meeting for two weeks so that the monitor, and Progressa and Capital, can consider LM's revised offer, which “provides a better return for the stakeholders, including the bondholders,” according to an application that lawyers plan to file in court Wednesday.
The court-appointed monitor said in its latest report that it “is not supportive of the offer from LM credit” and recommends the creditors vote for the available plan.