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Alterna Savings and Credit Union announced on Friday it will acquire most of the assets of troubled PACE.Tijana Martin/The Globe and Mail

Toronto-based Alterna Savings and Credit Union Ltd. will acquire most of the assets of troubled PACE Savings & Credit Union in a transaction that is intended to safeguard PACE’s core business, but split off parts that have put it under financial strain.

Alterna is acquiring most of PACE after Ontario’s financial regulator, the Financial Services Regulatory Authority of Ontario (FSRA), said Thursday it had reached a deal under which another credit union would absorb PACE’s 40,000 members. At the time, FSRA did not identify the other credit union.

Alterna will take on PACE’s employees as well as members, deposit accounts, loan portfolios, branches and PACE’s current head office in Vaughan, Ont., and is promising PACE members expanded banking services and a revamped digital banking experience when the deal closes. This will allow FSRA to hand over control of most of PACE, which has been under the administration of the authority and a previous regulator since the fall of 2018, and has struggled to turn itself around.

“PACE members will be well taken care of, and their employees will have a home with us,” said Rob Paterson, Alterna’s chief executive officer, in a statement Friday.

Ontario regulator makes deal to sell core business of PACE credit union

Alterna is Ontario’s third-largest credit union, with 184,000 members and customers, and previously had a tentative deal to merge with PACE in 2014, but the transaction was never completed. Years later, an Ontario regulator seized control of PACE and ousted its leadership over alleged misconduct in 2018.

The current transaction is structured in a way that will isolate some of the more troubled loans and liabilities held by PACE, which faces considerable financial pressure. Certain assets and liabilities of PACE will stay behind in a legal entity to be wound up at a later date, according to FSRA. In a Thursday letter, the regulator told PACE members they “will continue to be served by PACE’s employees and branches, which was a critical part of this transaction.”

FSRA spokesperson Judy Pfeifer said in a Thursday e-mail that “the financial details of the transaction are confidential.” She declined to provide further comment Friday.

The merger is intended to secure a more stable future for PACE’s members, who have faced uncertainty after more than three years of controversy, legal battles and faltering turnaround plans.

“Alterna Savings looks forward to bringing a new era of stability and confidence to PACE’s members and employees,” Mr. Paterson said in his statement.

Though PACE has been pursuing a turnaround plan under current CEO David Finnie, FSRA had been exploring a possible sale or merger since at least last June as a way to put PACE on more solid footing.

“PACE will get to enjoy the strength, stability, and security Alterna Savings offers,” Mr. Finnie said in a statement.

The transaction is expected to close in the second quarter this year.

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