Australian payments firm, EML Payments, saw its shares jump after news emerged that joint provisional liquidators had been appointed to its Irish prepaid cards unit, PFS Card Services Ireland Ltd (PCSIL).
Yesterday, Kieran Wallace and Andrew O'Leary from Interpath Advisory Ireland were appointed as provisional liquidators to PCSIL by the High Court.
Shares in EML Payments rose by nearly a third in early trade today, before ending the day at AUS$0.91, up almost 23% on the previous close.
The High Court was told that PCSIL is solvent, but that the winding up petition was being brought on the basis that its business model is no longer commercially viable, is loss making and bound to fail in the coming months.
The court also heard that the company, which holds €516m of segregated funds for customers with 2.4m prepaid cards in issue, expects to be in a position to pay all of what it owes its creditors.
In a statement following the development, the Central Bank said the joint provisional liquidators will continue to assess the solvency on an ongoing basis, throughout the liquidation process.
"PCSIL and Interpath have committed that all current card holders can, subject to new limits, continue to load funds to their card until 17 July 2024 and can continue to spend on their cards up to 17 January 2025 subject to certain changes and their terms & conditions," the regulator said.
"The Central Bank expects that the Firm will ensure that customers’ interests are fully protected."
"This liquidation does not impact the firm’s regulatory status, PCSIL will remain a regulated financial service provider and is required to continue to adhere to all applicable regulatory requirements including safeguarding, capital, anti-money laundering/countering the financing of terrorism and conduct requirements during the wind-down."
EML Payments said the action would conclude a period of significant earnings losses, cash burn and management distraction from operating PCSIL.
It said that going forward EML’s remaining exposure to PCSIL is limited to AUS$20 million of cash outflow, for the repayment of intercompany balances.
It added that a AUS$25 million non-cash impairment to EML’s financial accounts for the 2024 fiscal year will be made.
The PCSIL board said it considered a number of strategic options before it took the decision to seek to have the joint provisional liquidators appointed.
"We have determined this is in the best interests of the broader EML Group and our shareholders, given our focus to simplify the EML business and focus on our core businesses," said EML’s Chairman, Luke Bortoli.
"PCSIL is not commercially viable for future investment, and this decision will allow EML to redirect management resource and capital to our core businesses".
Established in 2008 by husband and wife team, Noel and Valerie Moran, PCSIL was sold to EML in 2020 for AUS$252.3m.
In 2021 the Central Bank raised concerns about PCSIL's anti-money laundering and counter terrorism financing, risk and control framework and governance.
The High Court heard the Central Bank imposed certain regulatory directions including restrictions on its ability to accept payments from customers.
PCSIL put a plan in place to address the issues raised, the court heard, and it was hoped that the plan would be completed before the end of last year.
But the bank expressed its dissatisfaction with the firm's plan and had indicated that it was considering issuing a direction that would limit its ability to grow.
Following those compliance issues the company changed its board of directors, and its parent commenced a strategic review of PCSIL's operations, the court was told.
The company currently employs 144 people, 112 of whom are based at the company's facilities at Bray Co Wicklow and Trim in Co Meath.
The rest of the employees are based at the firms branches in Spain and France.
