The assets consist primarily of servicing contracts on more than 8,500 ATMs nationwide. The sale price for the assets totaled $18 million, resulting in initial cash proceeds of $16.5 million after adjustment for the estimated book value of the net working capital acquired.
NetBank was carrying the assets on its balance sheet at a higher value than the sales price. The bank will therefore record an additional impairment charge of approximately $2 million to bring the book value of the assets into line with the sales price.
Prior to the sale, the assets were recognized as intangible assets. However, through the sale, the bank converted them into tangible assets by monetizing them. As a result, the bulk of the cash proceeds represents new tangible capital that management can pit to work in additional asset growth at the bank or other cost-saving initiatives. It also directly increases the company’s overall tangible book value.
The deal with PAI is a win-win proposition, said Steven Herbert, CEO of NetBank. PAI will be able to invest more in the operation and preserve the jobs of the talented team we had in place. In turn, we have generated significant new tangible capital. This money will prove important in our effort to maintain proper regulatory capital ratios and to protect shareholder value as we fight to get the company back on track financially through further restructuring or other alternatives.
Under the terms of the deal, PAI will operate the machines under the PAI ATM services name. PAI will re-brand the machines currently bearing the NetBank logo over the next 18 months. NetBank plans to honor its waiver of surcharges on these machines for its banking customers during the re-branding period.
