Modern Systems Corporation, an indirect, wholly-owned subsidiary of BluePhoenix Solutions, Ltd., provided an update on the expected timing of its proposed merger with Sophisticated Business Systems, Inc. ("ATERAS") and announced new debt financing from Comerica Bank.
The merger is an all stock transaction in which BluePhoenix will issue approximately 6.2M shares to ATERAS shareholders in exchange for 100 percent of ATERAS' shares. ATERAS will become a wholly-owned subsidiary of Modern Systems Corporation, subject to the satisfaction of the conditions to closing the merger, such as BluePhoenix shareholder approval. A meeting of the BluePhoenix shareholders is scheduled for November 18, 2014 to vote on the proposed merger and related transactions. If approved, this merger is expected to close prior to December 2014.
The merger will make Modern Systems one of the largest independent legacy modernization firms in the world, extending coverage in the US and offering a wider set of products.
The merger will also extend the company's sales channels, broadening partnerships with IBM, Dell, HP and Fujitsu. BluePhoenix recently extended a service agreement with IBM assisting in legacy system modernization with a large US government agency, and completed a successful project with UK financial services firm Moorcroft Debt Services.
Modern Systems also announced that it had entered into an amendment to its existing loan agreement with Comerica Bank to: increase the non-formula revolving line up to the amount of $2 million backed by guarantees; increase the borrowing base revolving line amount up to $1.5 million upon the closing of the ATERAS merger; and extend the loan maturity date to December 31, 2015. The amendment has a financial covenant for a minimum liquidity ratio effective upon the close of the ATERAS merger. BluePhoenix's obligations under the Amendment are secured by a security interest in BluePhoenix's copyrights, trademarks and patents. The remaining substantive provisions of the credit facility are not materially changed by this amendment.
"The new financing terms will help stabilize the company through the merger and lay the foundation for growth," says Bell. "We're fortunate to have a partner like Comerica, who recognizes the needs of our niche and believes in our ability to serve them."
Modern Systems Corporation, an indirect, wholly-owned subsidiary of BluePhoenix Solutions Ltd., is a leading provider of legacy modernization services.