Irish e-payment firm raises further US$10m

3 May 2006

Dublin headquartered e-payments firm FreeStar Technology has raised US$10m in a private placement with a Stockholm bank. The move comes within weeks of FreeStar terminating a previous venture capital deal and renegotiating a new one with a group of European investors bringing the total amount raised in the past two months to US$19.2m.

Yesterday it emerged that FreeStar has signed a private placement agreement to secure US$10m in financing from Stockholm venture firm Svensk Kredit och Finans AB.

The deal is the second amount of funding to be raised by the company, following on the heels of another venture capital agreement signed only a month ago that had replaced an original deal that had collapsed.

Towards the end of March FreeStar, whose e-payment service processes more than US$1.6m worth of payments a month for global brands such as Ikea and Finnair, revealed that a previously announced venture capital deal with European finance firm Soren Moberg had been terminated.

In a statement at the time FreeStar, which is led by an Irish management team consisting of CEO Paul Egan, CFO Ciaran Egan and operations director Fionn Stakelum, said the original deal with Soren Moberg collapsed due to failure of the investment group to fund the first payment by a set time.

In April it emerged that the new group of investors led by Olympia Holding AS agreed to invest US$9.2m on the same terms and conditions that were negotiated by the Moberg group and a first payment of US$4.6m was made by Olympia. The financing transaction was organised by Swiss-based firm, the Margaux Group.

Yesterday’s deal with Stockholm venture firm Svensk Kredit och Finans AB brings to US$19.2m the amount of money raised by FreeStar, which also goes by the name of Rahaxi-FreeStar, in the past two months.

The CEO of Svensk Kredit, Magnus Erneving, commented: “We have identified a number of opportunities for Rahaxi-Freestar in the European and Scandinavian market where we can assist. We consider our involvement with FreeStar a long-term investment.”

The agreement provides for the purchase of 25 million newly issued shares of restricted common stock at a weighted-average price of US$0.40 per share, and two-year warrants to purchase an additional 25 million shares at strike prices ranging from US$1.50 to US$3.

Egan commented: “Our ability to access the financial markets in this fashion indicates the confidence which the financial community has in FreeStar’s future.

“This US$10m financing, combined with the US$9.2m financing which we completed in March, further strengthens our balance sheet and provides us with the resources we need in order to execute our business plan. In addition, our revenue base continues to grow.

“FreeStar’s international expansion strategy includes forming strategic business relationships with strong influential partners within the local financial target markets we are pursuing. We are therefore looking forward to the mutual opportunities with Standardbolag AB, through its ownership in Svensk Kredit och Finans AB. We are very excited about the value which we believe we are building for FreeStar shareholders,” Egan added.

By John Kennedy