Some Pay By Touch Owners Are Also Among Its Largest Creditors

The bankruptcy petition Solidus Networks Inc., which does business as Pay By Touch, filed this month shows that a number of the biometric technology provider's largest unsecured creditors also have equity interests in the company, and, in the case of three individuals, weren't paid when Pay By Touch bought their company. The petition says the San Francisco-based firm owes its 30 largest unsecured creditors $39.3 million. In all, the company has assets of $100 million to $500 million and liabilities within the same range, according to the petition Solidus filed Dec. 14 in U.S. Bankruptcy Court in Los Angeles. It does not give specific amounts. The voluntary filing for Chapter 11 reorganization followed an Oct. 31 filing by several employees for involuntary bankruptcy, an action that started the clock running on the company's legal and financial options. On Dec. 14, Pay By Touch's board of directors passed a resolution saying that voluntary bankruptcy was in the best interests of the company's creditors, stockholders, employees, “and other interested parties.” The board also appointed Pay By Touch's temporary custodian, Thomas Lumsden, as its authorized officer in charge of bankruptcy-related matters. The Delaware Chancery Court had appointed Lumsden, a San Francisco turnaround specialist, as Pay By Touch's top executive while it sorts out a dispute between chairman John P. Rogers and a major investor, Greenwich, Conn.-based hedge fund Plainfield Asset Management LLC, over composition of the board of directors. Rogers, who has filed for personal bankruptcy, controls 64% of Pay By Touch's voting stock, but Plainfield claims a February 2007 financing agreement gives it power to appoint its own board if Pay By Touch breaches the terms, which Plainfield claims it has (Digital Transactions News, Nov. 19). Pay By Touch's largest unsecured creditor is OZ Master Fund, a unit of the prominent New York City-based hedge-fund firm, Och-Ziff Capital Management. Pay By Touch owes OZ $7.4 million. The four other largest unsecured creditors and the amounts they're owed are: consulting firm Accenture LLP, Chicago, $7.06 million; unsecured noteholder Denarius Touch, San Francisco, $5.37 million; marketing and public-relations services provider Saatchi & Saatchi of Atlanta and Chicago, $2.93 million; and Chicago storage provider Sungard Availability Services, $1.59 million. OZ, Denarius Touch, and two other unsecured noteholders?Plainfield affiliate Plainfield Direct LLC and Highbridge International LLC of New York City?also have secured claims. Plainfield and Highbridge both have unsecured claims for $555,000. The petition names nine persons or corporate entities with direct or indirect equity interests of 10% or more in Solidus. Besides Rogers and Plainfield, they include three individuals affiliated with Capture Resource Inc., a provider of reward programs and business-process outsourcing services that Pay By Touch bought in December 2005. The three are listed among the 30 largest unsecured creditors and are owed a total of $1.3 million. Other unsecured creditors run the gamut from hardware providers to law firms and consultants to a New Mexico company claiming it's owed $1.1 million for a product placement. An attorney with Hennigan, Bennett & Dorman LLP, the Los Angeles law firm Pay By Touch is using for the bankruptcy proceedings, and a Pay By Touch spokesperson did not return calls from Digital Transactions News seeking comment.