[GSilverman]

How big is "Huge"? Is their book smaller or larger than their outstanding balance with Wells?

[Michael I]

How big is "Huge"? Is their book smaller or larger than their outstanding balance with Wells?

In 2014 when compared to on deck value they said can is worth about 2 billion.

[staten]

In 2014 when compared to on deck value they said can is worth about 2 billion.

3 years is a long time. Yes-huge is a relative term. The haircut to their securitzation due to "misclassifed" MCA's was astronomical. Wells wants out. ASAP. The other lenders in the facility want out ASAP. They need to take haircuts on deals to get cash in the door. Future debt capital will come from hedge funds who will keep them on a short leash and the rates will be at least double-12-14%. Every single merchant should be negotiating a 50% (at least) discount. If they are trying sell portfolio-likely reps will not get renewal commissions. Entire process has been handled very very poorly.

[GSilverman]

Agreed Staten. What if the outstanding balance on their $650M Wells line now exceeds the value of their Book of Business? The attrition rate due to normal maturity + old nopo + new nopo + payoffs + negotiated settlements has been huge. Maybe just maybe the company is or is becoming worthless. Past projected market cap is meaningless. Current book value is meaningful.

[staten]

I do think it is insolvent unfortunately. I think they still have about 100 people on payroll (terrible for employees), probably late on vendor payments, antiquated technology, no brand value. Time is not their friend. To be blunt, a MCA default will not go on a credit report until a judgement is filed. What's the balance that makes pursing legal action cost effective? Over $50k? If I'm a merchant with a balance less then $50k, do I just play the odds that Can goes under and then settle for pennies? Conversely, SFS actually did an outstanding job of taking over Credibly's portfolio. Seamless.

[GSilverman]

Good Points, Staten. CAN may now be insolvent and the next step may be BK. Board pundits, please way in with your opinions.

[Michael I]

I agree with all you saying (I believe you meant capify) but bottom line even with all those issues I believe due to size they will survive or at least be bought out

[GSilverman]

"and bought out" what is there to buy?

[WestCoastFunding]

lol try to explain that when that stip comes up in his next funding

When I got the reduced payoff from CAN Capital, BFS has zero problem with it at all.

Again, for the longest, every single CAN payoff letter comes with a 6% discount if paid early. Every. Single. One. Asking CAN for additional savings is just smart. CAN is desperate for cash, if only to use on renewals. Because of CAN's situation, theyd much rather get 90% of their money now, then wait 10 months and risk stacks and defaults. It's a win-win for all.

[mcg168]

So Wells wants out so badly that they just re-extended their line and gave them authorization to lend again? Gotcha. CAN is lending on renewals as of this week, but its only available to limited partners and deals they really dont want to lose. I was shocked but we got a funding notification yesterday evening.

2-3 weeks from now they will be fully operational again. Its not going to be the CAN of 2014/2015/2016 but they will still be easier to deal with than 90% of the companies out there today.

[ridextreme]

When I got the reduced payoff from CAN Capital, BFS has zero problem with it at all.

Again, for the longest, every single CAN payoff letter comes with a 6% discount if paid early. Every. Single. One. Asking CAN for additional savings is just smart. CAN is desperate for cash, if only to use on renewals. Because of CAN's situation, theyd much rather get 90% of their money now, then wait 10 months and risk stacks and defaults. It's a win-win for all.

12K is 33% of their balance, not 6%.

[Funder Mark]

So Wells wants out so badly that they just re-extended their line and gave them authorization to lend again? Gotcha.

Where did you see that?

[WestCoastFunding]

12K is 33% of their balance, not 6%.

Again, 6% is automatic on CAN payoff letters. If they chose to offer a 6% discount or 33%, it's their choice and won't affect funding with another company. As I mentioned previously, my client negotiated a 20% discount to payoff CAN 10 months early. And BFS had no problem with it. Negotiating savings for early payoff isn't a problem with most funders, as it benefits both parties. Funders eliminate all risk and can then use that money to fund again. Many funders I've worked with will reduce the factor rate by 1-2 points for each months paid back early. So really, negotiating savings for paying off early won't have an effect.

[mcg168]

Its not something thats going to put out in a press release. Just like you never saw Wells comment on the previous stories with CAN.

[GSilverman]

Copy and paste the dated Funding Notification you received and obscure the client's name

[CreditGuy]

CAN will almost certainly survive. By laying such a large portion of their staff, they are saving a lot on opex, perpetually. At an organization that size, you have a certain % of employees (tech, finance, project managers, etc.) that are there solely to create new products and/or to grow the company and scale infrastructure for the future, along some leading hires in the operations, credit, and risk functions that will support it when it occurs. Those are all disposable in a shrinking balance sheet environment, and the forecasted expenditures to support those projects becomes free cash again. CAN can operate with their existing technology, infrastructure, and staffing for a long time (provided they get credit losses under control) given they are current built to operate at a larger scale they they were, with ample room to grow.

They do still have a brand, and that brand has goodwill. They pioneered the cash advance and have more data and observations over a longer timeline than anyone else for model development and analysis. Don't underestimate that last point either. The ONLY way to get credit performance data trained on your products in this space is to do it in real time given the lack of historical proxies. They are also the only firm in the space of any meaningful size that has historical data that could inform how to run a downturn playbook in the next economic cycle, which is coming.

CAN sticks around, albeit smaller and more humble.

Edit: There's an outside chance some bank that wants to enter the space buys CAN and all their data.

[GSilverman]

"the brand has goodwill"

[CreditGuy]

Is there another company in this space that can say they invented the MCA and has been around for nearly 2 decades?

[GSilverman]

A few years ago, a German pilot, with a perfect record, flew a commercial jet full of passengers into a mountain.

[CreditGuy]

And that makes any learnings and observations of value gained during all the flights before that one worthless? Hint: It doesn't.

[staten]

Is there another company in this space that can say they invented the MCA and has been around for nearly 2 decades?

If their data and systems cannot adequately track cash collections, how good could it be? It also makes sense that Wells would give them room for renewals as it is in their best interest for the company to continue operations in some capacity while Jeffries looks for some kind of deal. But they do want to reduce their exposure asap and exit. Maybe Jeffries can put together something but the equity value is nil.

[CreditGuy]

If their data and systems cannot adequately track cash collections, how good could it be?

Their data and systems did track it, but the humans in charge manipulated it in such a way that it didn't show on the data tapes as past due.

[GSilverman]

Can you imagine a company which prides itself on understanding analytics publicly saying we couldn't track a late payment of $50 (due to a verbal grace period) vs an on time payment of the contractual amount.

Do any of you actually believe this?

[GSilverman]

Looks like Credit Guy believes.... Thousands of partial late payments were made and due to thousands of manual manipulations by dozens of employees, the actual amount collected was inaccurate for years.

[J.Celifarco]

And that makes any learnings and observations of value gained during all the flights before that one worthless? Hint: It doesn't.

everything you are saying is true, the problem is if Wells Sues them for 600+ million all the good will and brand name in the world wont keep their doors open.. Thats just what we know of, who know who else has money with them that was given false data, and is going to lining up to sue them.. I say the opposite, I think the possibility of them getting out of this mess is slim to none