This story has been updated from the April 21 version to reflect the role of Alterna Savings.
The core business of troubled financial firm PACE Credit Union will be salvaged in a deal with Alterna Savings and Credit Union Ltd., and the rest of it will be wound up.
On April 21, the Financial Services Regulatory Authority of Ontario (FSRA) — appointed in 2018 to oversee the operations of PACE amid alleged misconduct and mismanagement — announced a forthcoming transaction that will “set a new course for PACE” in a letter to the credit union’s members.
Today, Alterna Savings revealed that it’s on the other end of the deal.
Alterna Savings said it’s acquiring the loan portfolios and deposit accounts of PACE, along with the firm’s branches and its head office in Vaughan, Ont. The employees of PACE will also join Alterna.
The terms of the transaction were not disclosed.
Subject to regulatory approval and other closing conditions, it’s expected the deal will close in the second quarter.
“Alterna Savings looks forward to bringing a new era of stability and confidence to PACE’s members and employees. And, as a reputable and experienced partner, we are proud to continue enhancing the [credit union] system’s long-term sustainability and stability through this transaction,” said Rob Paterson, president and CEO of Alterna, in a release.
“The decision by FSRA to have PACE enter into this transaction followed a careful assessment of the various options available to PACE in light of the impact of pre-administration mismanagement and the Covid-19 pandemic,” the regulator said in its letter.
The letter also noted that FSRA will “continue to vigorously pursue legal claims against the former senior management and certain former directors of PACE, as well as others, to recover damages and losses caused by their mismanagement. FSRA will also determine the process for the eventual wind-up of the PACE legal entity.”
While FSRA didn’t disclose the specifics of the transaction, its letter did specify that investment and profit shares (which are held by about 2% of PACE members) and PACE membership shares, which currently can’t be redeemed due to the credit union’s weakened capital position, will be dealt with as part of the wind-up process.
Those shares will “remain with PACE and be addressed as part of the wind-up of the PACE legal entity” — although it’s not clear what that will mean for those shareholders.
“We can’t speculate on the timeline for completion of this process nor the ultimate outcome,” FSRA said in its letter.
As a result of the pending transaction, PACE will not be holding an annual general meeting this year, the letter said.