This article comes fromThe Block, original author: Yogita Khatri
Odaily Translator |
Odaily Translator |
Encrypted lending platform Nexo was in talks with its rival Vauld about a potential acquisition, but talks have now ended.
The potential deal fell through after six months of talks, according to a person familiar with the matter and an email obtained by The Block. "Unfortunately, our discussions with Nexo have not been fruitful," Vauld founder and CEO Darshan Bathija said in an email to the company's creditors.
Nexo and Vauld have been negotiating a potential deal since early July, when Vauld stopped customer withdrawals after facing a severe liquidity crisis. At the time, Nexo had entered into an exclusive 60-day due diligence agreement with Vauld for a possible acquisition of the company. Subsequently, Nexo extended the due diligence period twice. The two sides have now officially concluded negotiations.
Bathija wrote in an email, “We have since sought a mutual agreement with Nexo to terminate the existing exclusivity arrangement. We will continue to actively engage with the shortlisted fund managers to develop a viable strategy."
There were several reasons why the potential deal fell through, the people said. These include Vauld's massive loss of funds in the collapsed Terra ecosystem, the seizure of its assets by Indian authorities, funds trapped on the bankrupt FTX platform, and a huge loan receivable involving Amber Group. Furthermore, Vauld has many clients in the U.S., where Nexo recently announced plans to exit the U.S. market, so the potential deal doesn’t make sense for Nexo, the person added.
Nexo approached Vauld twice with potential deal terms before terminating talks. However, Vauld and his creditors were not happy with the terms.
“The revised Nexo proposal does not allow for a debt tender offer via a reverse Dutch auction (RDA) that would provide creditors with an early exit option. We have explained to them,” Bathija wrote in an email. Said, in accordance with our agreement with creditors, the early exit option is critical to the success of any proposed restructuring. Unfortunately, the benefits provided by the revised Nexo proposal, such as credit early exit is set a threshold, in our opinion Most creditors generally fail to meet its threshold...Given the foregoing, we do not believe that the revised Nexo proposal is in the best interest of all creditors."
Vauld and its creditors also argued that Nexo had not been transparent enough about its financials during the negotiations. “Nexo has failed to respond to requests for a full due diligence review, including an assessment of Nexo’s solvency, or, in the event of Nexo’s insolvency, agreed measures to provide creditors with a better Assure."
Now that a potential Nexo acquisition has fallen through, Vauld's proposed restructuring plan involves selecting a fund manager to manage client assets. "During our search, we identified six potential fund manager candidates, received proposals from four of them, and shortlisted two potential fund manager candidates following initial discussions and reviews." “We are developing the proposed strategy and mandate and negotiating with creditors with a view to agreeing with the shortlisted fund managers in the new year,” Bathija wrote in an email.
According to the email, Vauld's current financial shortfall is $98 million. "Overall, the net deficit or 'shortfall' has increased from $81 million to $98 million since August 1, 2022, when we reported the company's financials. This is due in large part to a loss in value due to : FTX bankruptcy proceedings, in which we had a net exposure of $8.8 million; and a token price depreciation of ~24% relative to stablecoins.”
Vauld has until Jan. 20 to resolve its financial problems, and the court last month granted it an extension until March of a moratorium preventing legal action by creditors. However, the company has applied for another extension, according to a document obtained by The Block. "We will hold a hearing on the extension of the moratorium on January 17, 2023."
