Ontario’s financial regulator has launched a process to explore a distressed PACE Savings and Credit Union sale or merger, urging other credit unions to signal their interest in merging by month’s end , sources said.
Ontario’s financial regulator grants PACE $ 500 million credit facility to ensure it can continue to operate
PACE is fighting deteriorating financial results and trying a comeback since regulators took control of the credit union in 2018, alleging they discovered a series of governance issues and a pattern of fraud and fraud. self-operation on the part of former PACE leaders.
The Financial Services Regulatory Authority of Ontario, or FSRA, acting as the administrator of PACE, has retained the accounting and professional services firm KPMG Canada to handle discussions about a possible merger, according to three sources familiar with the process. This included setting up a data room to allow executives of other credit unions to assess PACE’s assets and financial condition, the sources said.
Those visits are now underway and the regulator has set a June 30 deadline for interested parties to submit letters of intent, the sources said. But there is no certainty that the talks will result in a sale.
The Globe and Mail does not identify the sources as they are not authorized to discuss the confidential sale process.
FSRA spokeswoman Judy Pfeifer said in an email that the regulator “is working with PACE management on options – ranging from a pending independent transaction to the possibility of a merger – which serve in the best interests of PACE members “.
In a newsletter Sent to members this week, PACE CEO David Finnie said that in light of the challenges facing the credit union, “we can and must assess PACE’s options for moving forward,” and described the same two scenarios.
As late as mid-April, FSRA said there was “no discussion or agreement to merge or sell PACE and there was no need to withdraw it.” Two weeks later, at the annual meeting of credit union members on April 28, Finnie for the first time recognized that a merger with another credit union might be an option. But he assured members that the credit union is stable and viable, and that PACE is focused on a recovery plan to gradually return to profitability.
A few days after the annual meeting, the FSRA set in motion the sale process, two sources said.
In an email, Mr. Finnie said that “the management of the credit union is working on a turnaround plan as I spoke to the [annual meeting]And referred questions about a sales process to FSRA.
Ms Pfeifer said the FSRA is overseeing the work of PACE management on this turnaround plan and that the regulator “is satisfied with the progress made”.
KPMG spokeswoman Caroline Van Hasselt declined to comment.
Based in Vaughan, Ontario, PACE has $ 1.1 billion in assets and approximately 40,000 members, but lost $ 22.7 million in 2020 after making a profit of $ 364,000 the previous year. The credit union exceeded its minimum capital thresholds in April and, in response, the FSRA stepped in to provide an unusual lifeline that included extending a $ 500 million credit facility to ensure that PACE could respond to members’ requests to withdraw deposits.
The future of the credit union will likely be shaped by the outcome of two pending lawsuits, each of which could weigh heavily on any decision about a sale or merger. The first lawsuit targets the former senior executives and directors who ran the credit union until their ouster in 2018, and FSRA hopes to recover “significant” funds on behalf of PACE.
At the same time, PACE is in mediation over a claim filed on behalf of retail investors who lost a combined $ 49 million on investment products sold through an affiliate of investment brokers. now defunct, Pace Securities Corp. These investors are looking for up to $ 60 million in compensation.
The settlement strategy for these lawsuits was a major point of contention when PACE’s first attempt at turnaround took place last November, when two senior executives and an entire board of directors chosen by the FSRA to revive PACE resigned. after colliding with the regulator.
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