Adam JacksonSafe Harbor Financial (Nasdaq: SHFS) successfully modified its debt agreement with Partner Colorado Credit Union, unlocking more than $6 million in cash flow and extending the repayment deadline until 2030, the company said Wednesday.
The firm said the restructured debt will maintain its current 4.25% interest rate while allowing for a two-year interest-only payment period. The arrangement frees up money that would have gone toward paying down the loan’s principal.
The debt modification comes just one month after Safe Harbor announced a temporary pause on principal payments for February and March while the parties negotiated new terms. At that time, the company estimated the temporary pause would improve liquidity by approximately $510,000.
“Not only does the note modification significantly enhance our financial standing, I can confidently say that it also provides Safe Harbor with tremendous optionality as we enter this new chapter,” CEO Terry Mendez said in a statement.
Mendez, who was appointed as CEO following Sundie Seefried’s retirement announcement in early February, faces a variety of challenges ahead. In the company’s September 2024 quarterly report, it warned investors there was “substantial doubt about its ability to continue” as a going concern, reporting a 19.6% revenue decline and a working capital deficit of $2.5 million.
The company’s financial troubles partly stem from its Abaca Merger, where according to a report from Green Market Report last month, “the purchase price exceeded the fair value of the net identifiable assets acquired,” resulting in fewer accounts and prompted litigation over $3 million owed for the merger.
Partner Colorado Credit Union, which is both a lender and major shareholder in Safe Harbor, expressed support for the restructuring.
“As one of the largest shareholders, we realize that Safe Harbors’ success contributes to the success of our members,” said Doug Fagan, president and CEO of Partner Colorado Credit Union. “We expect this debt modification will provide Safe Harbor with the financial flexibility needed to pursue new opportunities.”
The modified agreement is designed to provide flexibility for exploring new growth opportunities while reinforcing “commitment to delivering long-term value to all stakeholders,” according to Mendez.
