Triumph in Texas reworks terms of factoring acquisition
Triumph Bancorp in Dallas has amended the terms of a completed acquisition to address alleged fraud on the seller's side of the deal.
The $5.6 billion-asset company, which bought Transport Financial Solutions in early July, disclosed a month later that it had concerns about $66 million of the $103 million of assets acquired in the deal. The issue involve advanced payments to trucking companies that were based on agreements for future work.
Triumph and Covenant Logistics Group, which had sold the business, renegotiated the price, lowering the cost to Triumph by more than half, to $62.2 million.
The new agreement should benefit Triumph and “limit the risk associated with these assets,” Brad Milsaps, an analyst at Piper Sandler, wrote in a note to clients. He said the original price included $108.4 million in cash, $13.9 million in Triumph stock and a $9.9 million earnout.
Covenant agreed to return the stock portion of the purchase price, or roughly 630,000 shares, and eliminate the potential earnout. The seller “also agreed to establish a new covenant that would indemnify Triumph and protect it from losses" tied to potentially fraudulent advances, Milsaps said in his note.
As a result, Covenant will be responsible for any Triumph losses on the first $30 million and half of any losses on the next $30 million.
Triumph said in the filing that Covenant pledged equipment collateral with a liquidation value of $60 million to solidify its commitment. Triumph also said it provided Covenant with a $45 million equipment-secured line of credit that could be used to cover obligations under the new agreement.
“We are glad to see the companies are willing to work together to resolve this issue completely,” with a deal that will “protect against losses in the event that the contracted work is not completed,” Milsaps said.
Milsaps said the worst-case scenario for Triumph would involve $8 million in losses, while the best-case scenario would include an $8 million gain if all $62 million of the receivables are collected.