Pay By Touch Fades into History As Lenders Buy Core Assets

Three months after biometrics-technology provider and payment processor Pay By Touch sought protection in U.S. Bankruptcy Court in Los Angeles, the dismantling of the firm’s sprawling empire is largely over.

Judge Thomas B. Donovan recently approved the sale of the core assets of Solidus Networks Inc.—the formal name of Pay By Touch—to a consortium of Solidus lenders called YT Acquisition Corp. for $4.4 million in cash and a so-called credit bid of $50 million. That’s essentially the value of debtor-in-possession and secured financing Solidus owed YT by which the Los Angeles bankruptcy court reduced the purchase price. Spokespersons for YT, which the lenders created to buy the assets, refused to comment about the sale or say what YT would do with them. The core assets identified by Solidus’s court-appointed managers include the now-shuttered biometric finger-identification system that enrolled consumers could use to pay for purchases at merchants, and various loyalty and marketing services subsidiaries.

Court filings show YT’s affiliates are a who’s who of private-equity firms and hedge funds, including Och-Ziff Capital Management Group LLC and Plainfield Asset Management LLC. Those firms and others helped San Francisco-based Pay By Touch raise a reported $300 million in equity and debt financing since 2002, money former chief executive John P. Rogers used to buy numerous technology and processing companies. Plainfield led a successful move to oust Rogers late last year as Pay By Touch’s cash position collapsed.

Pay By Touch’s acquisitions ranged from CardSystems Solutions Inc., a big merchant processor that gained notoriety in 2005 as the source of the biggest breach of payment card data up to that time, to S&H Marketing Inc., successor company to the founder of the old S&H Green Stamps, once the country’s most famous loyalty program. S&H, which went to YT with the core assets, has updated its stamp-based system with a Web-based program called Greenpoints.

Donovan late in March approved the sale of one of Pay By Touch’s big non-core assets, the third-party merchant-processing business of Pay By Touch Processing Inc., to South Jordan, Utah-based Merrick Bank Corp. for $2 million (Digital Transactions News, March 28). Other non-core assets recently sold were ATM Direct and BioPay Paycheck Secure. The major non-core asset left to be sold is the independent sales organization half of the processing unit, Pay By Touch Payment Solutions LLC, which has more than 60,000 merchants.