Paystone enters CCAA with insider sale planned after billing error, debt-funded growth

Paystone Holdings Inc., Paystone Inc., Atom Growth Inc. and Atom Growth (USA), Inc., a group of Ontario-headquartered payment processing companies, obtained Companies’ Creditors Arrangement Act protection on June 5, 2026, ultimately preparing to seek approval of a sale to a buyer controlled by their founders.

The companies provide integrated payment processing, gift card, loyalty and customer engagement software to small and medium-sized businesses. The group serves approximately 38,000 customers across Canada and the United States and has approximately 118 employees, all employed by Paystone Inc. Its customer base is concentrated in service-based businesses, including hospitality, automotive, healthcare and wellness, and other general service businesses. In the last 12 months, the company processed more than 50 million transactions representing more than $7 billion in gross merchant volume.

Paystone’s financial difficulty followed a period of rapid, largely debt-funded expansion. The company began in London, Ontario in 2009 through predecessor Zomaron, later expanded through acquisitions including DataCandy, NXGEN Canada, NiceJob and Canadian Payment Services, and most recently completed the Ackroo acquisition on March 31, 2025. The applicants said those acquisitions, expenses tied to uncompleted US transactions and rising interest rates strained liquidity. The pressure intensified after an April 2, 2025 billing error following a transition of billing operations to a new bank, which overcharged a significant number of customers by a factor of 100. The company said the error caused customer losses, reputational damage, remediation costs and defaults under its senior credit agreement.

The capital structure was already under stress before the filing. As at April 30, 2026, the applicants reported approximately $50.6 million in assets and approximately $117.9 million in liabilities. The liabilities included approximately $91.3 million under senior credit facilities with Sandton Investments X (Luxembourg) S.À R.L. (which only recently acquired the debt from the previous syndicate of lenders), $11.6 million under a subordinated secured loan with BDC Capital Inc., $10.4 million in trade payables and accrued liabilities, and $4.3 million in promissory notes.

After the billing error, the company engaged Canaccord Genuity Corp. on September 5, 2025 to run a sale and marketing process and retained Reflect Advisors, LLC as chief restructuring officer on October 14, 2025. The former senior lending syndicate delivered demand letters on December 22, 2025, then entered into a forbearance agreement on February 11, 2026. Canaccord’s pre-filing process contacted 94 prospective parties, 35 of which executed NDAs and 27 of which held discussions or meetings with the company. The process produced four non-binding term sheets from prospective go-forward lenders, but no equity acquisition proposal.

Sandton emerged outside that process with a proposal to acquire the obligations under the senior credit facilities. The loan purchase transaction was agreed on May 8, 2026 and closed on May 12, 2026. Sandton paid less than half of the outstanding obligations and that the former syndicate realized a loss of more than half of the principal amount owing. Under the Sandton forbearance agreement, the maturity date under the senior credit facilities was extended from December 31, 2027 to May 8, 2028, principal bears interest at 5% per annum, Paystone must make fixed monthly blended payments of $825,000, no further advances are available, and Paystone can receive a discount of more than $35 million if specified waiver termination events do not occur.

The proposed restructuring is centered on a sale transaction to 1001632600 Ontario Inc., a purchaser controlled by Paystone co-founders Tarique Al-Ansari and Abdullah Saab. The applicants intend to return on June 15 to seek approval of the transaction, under which substantially all material assets would vest in the purchaser free and clear of claims and encumbrances. The purchaser would make a cash payment sufficient to satisfy priority payables and fund a $226,000 wind-up reserve, while entering into a new credit agreement with Sandton that would permanently reduce the senior debt from more than $92 million to $60 million. The applicants say the transaction would preserve the business as a going concern and that substantially all 118 employees are expected to be offered employment by the purchaser on substantially similar terms.

While granting the initial order, the court expressed concern that BDC, the subordinate secured creditor, received only a few hours of informal notice before the initial hearing despite having a material interest. Justice Myers said the applicants “ought to have done better” on notice and stated that better evidence and argument would be needed at the comeback hearing for including the CRO in the administration charge.

AlixPartners (formerly KSV) is the monitor, Reflect Advisors is the CRO and Canaccord Genuity is the financial advisor. Counsel includes Bennett Jones for the companies, Osler for the monitor, Goodmans for Sandton, McMillan for BDC, and Miller Thomson for the proposed purchaser.