Software company Ebix goes bankrupt after attacks from short sellers and debt problems
Insurance software company and short seller target Ebix Inc. has filed for bankruptcy after struggling to recover from high interest rates and looming debt payments. The Johns Creek, Georgia-based company listed assets and liabilities of at least $500 million each in a Chapter 11 petition filed in Texas. The filing protects the company from creditors while it seeks court approval for a plan to pay them back. (Photo: Bloomberg)
By Advait Palepu, Amelia Pollard and Jonathan Randles
Insurance software company and short seller target Ebix Inc. has filed for bankruptcy after struggling to recover from high interest rates and looming debt payments.
The Johns Creek, Georgia-based company listed assets and liabilities of at least $500 million each in a Chapter 11 petition filed in Texas. The filing protects the company from creditors while it seeks court approval for a plan to pay them back.
Publicly traded Ebix is the parent company of Indian fintech company EbixCash, which powers payments, foreign exchange and prepaid gift cards. The company's nearly 200 subsidiaries outside the U.S. are not included in the bankruptcy filing, according to a statement.
In bankruptcy, the company plans to sell its North American life insurance and annuity assets to help pay off its debt. Insurance company Zinnia, backed by Todd Boehly's Eldridge Industries, will kick off the auction with an opening bid of $400 million. The company and its advisors will “conduct an extensive marketing and sales process” for the company's assets, according to the statement.
The bankruptcy filing is not the first time Ebix has run into problems. Ten years ago, a deal fell for Goldman Sachs Group Inc. to buy the company broke up after a US criminal investigation came to light. Neither the Justice Department nor the Securities and Exchange Commission, which conducted its own investigation, ultimately took action against Ebix.
The problems of the accountant
Ebix blamed its bankruptcy on rising interest rates and the looming maturity of about $617 million in loans. Ebix said it faced additional challenges following the resignation of its former accountant RSM US LLP and “aggressive inquiries from short sellers of the company's stock.”
RSM resigned in early 2021 due to disagreements with Ebix management over the treatment of certain accounting classifications related to the company's gift card business, Ebix Chief Financial Officer Amit Garg said in an affidavit. Short seller Hindenburg Research previously accused Ebix of fabricating some of its revenue, including a significant portion of revenue from its gift card business – an accusation the company denied.
Ebix retained outside attorneys and accountants to investigate the issues identified by RSM, but the company's board of directors “was confident that no action was necessary regarding the company's gift card business.” Still, the market reacted negatively to RSM's resignation and the subsequent Hindenburg report, which resulted in a 40% decline in the company's market value, Garg said.
The case concerns Ebix Inc., 23-80004, US Bankruptcy Court for the Northern District of Texas (Dallas).
First print: December 19, 2023 | 12:03 pm IST