Citing the weak economy and “an unsustainable debt load,” the big independent sales organization Cynergy Data filed for Chapter 11 protection Tuesday in U.S. Bankruptcy Court in Delaware. The Long Island City, N.Y.-based processor also said it planned to sell its assets to The ComVest Group, a private-equity firm with holdings in several other merchant processors. In a press release, Cynergy Data chief executive Marcelo Paladini said the Chapter 11 process would allow the company to continue providing its merchant credit card processing services while completing a structured asset sale. And in a separate letter to “our friends and colleagues in the payment processing industry,” Paladini said, “As you may know, like so many companies in the electronic payment industry, Cynergy Data has faced its share of challenging circumstances recently. From the difficult economic conditions to an unsustainable debt load, our employees, management team, and industry partners have striven to overcome these challenges and continue delivering world-class payment-processing services.” The announcements did not go into detail about Cynergy Data's financial problems, and spokespersons were unavailable for comment late Tuesday. Three corporate entities filed for Chapter 11: Cynergy Data Holdings Inc., of which Paladini owns 92%, and its wholly-owned affiliates, Cynergy Data LLC, the main operating company, and Cynergy Prosperity Plus LLC. Cynergy Data LLC listed assets of $109.5 million and total debts of $186.2 million. The bankruptcy petitions list Cynergy Data's 25 largest unsecured creditors. The top five and the amount they are owed are: Process America, $2.81 million; Chase Paymentech Solutions, $2.63 million; TSYS (Total System Services Inc.), $1.46 million; MyGrantSite.Net, $1.38 million; and Second Source, $1.06 million. Founded in 1995, Cynergy Data has a portfolio of nearly 80,000 merchants that generate more than $10 billion in annualized charge volume. The company's Web site lists its sponsoring banks as Wells Fargo & Co. and Harris N.A. The bankruptcy court would supervise the proposed “stalking horse” auction of Cynergy Data's assets under Section 363 of the U.S. Bankruptcy Code. In such a sale, a prearranged buyer, in this case ComVest, comes in with a bid that establishes a floor price for the debtor's assets. But other interested parties could win if they submit better bids. Cynergy Data hopes to complete the sale in 90 days. The processor says it has sufficient cash to continue operating during the sale process, and it also has a commitment letter for debtor-in-possession financing. West Palm Beach, Fla.-based ComVest has controlling interests in such payments firms as Pipeline Data Inc., Cardaccept Inc., AirCharge.com, SecurePay.com, and Northern Merchant Services Inc. In a statement, ComVest managing partner Pete Kight said, “We believe that Cynergy has a significant competitive advantage in its processing business, offering superior service and technology to its many merchants and ISO partners. As a firm that has a great deal of experience in payments processing, we are committed to Cynergy's success in the future and look forward to partnering with Cynergy's management team in serving the industry for many years to come.” Kight founded CheckFree Corp., the big bill-payment and payments software firm now owned by Fiserv Inc. Cynergy Data has appointed a chief restructuring officer, Charles M. Moore. A hearing is expected Wednesday at the bankruptcy court in Wilmington, Del.
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