Embattled EML pays £15m to settle outstanding liabilities to Prepaid Financial Services

Embattled Australian payment group EML Payments has agreed to pay £15m (€17.5m) to the sellers of Prepaid Financial Services Group (PFS) to settle all outstanding liabilities associated with the soured 2020 deal to buy the business.

Prepaid Financial Services was founded by Noel and Valerie Moran, who are based in Navan, Co Meath. Their fortune has allowed them to indulge in their love of horse racing, buying a string of horses including runners at Cheltenham.

The sale of their business to EML was first announced in late 2019 and valued the Irish company at about €265m.

However, the following April, EML negotiated a 30pc cut in the price. The Morans owned just over 80pc of the Irish company, so even a reduced deal that came with ‘earn-out’ conditions catapulted them to multi-millionaire status.

But in early 2021, the Central Bank of Ireland raised concerns in relation to the Irish firm’s anti-money laundering/ counter-terrorism financing, risk and control frameworks and governance.

That news led to shares in EML falling close to 50pc after a two-day trading halt.

Early last year, EML said the Central Bank had written to it stating PFS had made “limited remediation progress to date with significant and ongoing deficiencies remaining”. These related to its anti-money laundering and countering the financing of terrorism framework.

The Central Bank said it was “not satisfied” with PFS’s remediation plan and timetable for completion.

Liquidators were appointed to PFS Card Services Ireland Ltd this January.

It’s not insolvent, but the High Court was told that its business model was no longer commercially viable or sustainable and the firm would otherwise fail in coming months.

PFS Card Services Ireland Ltd is part of the wider PFS business.

The acquisition of PFS Group in 2020 included deferred consideration in the form of loan notes of £20m in total plus interest, payable in two instalments on June 30 this year, and June 30, 2025.

At full term, EML’s liability for the loan notes would have a value of £22.9m, inclusive of accrued interest, with the first tranche payment of £11.25m due in about three months’ time.

“EML has agreed with the PFS vendors to settle the entire loan note liability for £15m, representing a discount of £7.9m,” EML told investors yesterday.

It added: “Settlement of the loan notes concludes all outstanding matters between EML and the PFS vendors including, but not limited to, acquisition earnout arrangements for which nil will be paid.”

The settlement amount will be paid by the end of July this year and funded from EML’s cash balance.

“Settlement of all outstanding actual or potential liabilities from EML’s PFS Group acquisition structure is another important milestone in the delivery of the EML Group’s strategic review,” noted the Australian firm.

“By reducing the loan note liability and negating all other potential liabilities arising from the PFS Group acquisition structure, inclusive of potential earnout disputes, EML will strengthen its balance sheet and further de-risk the business,” it said.

EML Payments is a global payments company that operates in Australia, the UK, Europe, and the US. Its customers are diverse and include major banks in Europe, government, retail brands and financial services companies.

“EML has agreed with the PFS vendors to settle the entire loan note liability for £15m, representing a discount of £7.9m”