WEX has reported a $400 million investment from a partner of Warburg Pincus, which the financial services tech firm will use to continue operations amid the global pandemic, according to a press release.
Melissa Smith, WEX’s chair and CEO, said the company plans to fortify its balance sheet while remaining in a strong business relationship with Warburg Pincus, which she said has always been committed to WEX's growth.
“The combination of this investment and the recent credit agreement amendment put us in an even stronger financial position with additional financial flexibility, improved liquidity and increased cash on hand," she said, according to the release. "This better positions us to remain focused on our long-term strategic initiatives to drive our future success, and capitalize on the economic recovery when market conditions improve.”
In addition, the deal will amend WEX's credit facilities to help it get increased flexibility with its proposed deal with eNett and Optal. In May, WEX tried to back out of the deal, claiming the adverse effects of the pandemic made it impossible. In response, eNett, a travel payments company, and Optal, which works in B2B optimization, said they intended to fight to force WEX to perform its contractual obligations.
The companies said the fact that the agreement was executed Jan. 24, while the pandemic already existed, meant WEX couldn't claim material adverse effect in trying to say the pandemic had made it impossible to go through with the deal.
Both companies filed lawsuits to force WEX to uphold its end of the deal.
But with the new investment from Warburg Pincus, WEX said it hopes to continue complying with the deal as much as it can, despite vowing to continue fighting for its own interests in backing out due to the pandemic, the release states.
Warburg Pincus is buying 577,254 shares of WEX common stock, with the total aggregate investment being around $90 million, or $155.91 per share. Warburg Pincus is also purchasing $310 million in convertible notes, with net proceeds of $299 million.
The terms of the latter agreement include that the convertible notes have a seven-year term and are non-transferable for one year, interest is payable in cash at a rate of 6.5 percent per annum, it is convertible to shares of common stock at any time at a price of $200 per share, and in the event of some unforeseen change, Warburg Pincus could require WEX to buy back its convertible notes, the release states.
Warburg Pincus will own around 4.7 percent of WEX's outstanding common stock. And James Neary, managing director of Warburg Pincus, will continue to serve on WEX's board of directors.