sc13dza

Dated: December 23, 2008

TENNENBAUM CAPITAL PARTNERS, LLC, a

Delaware limited liability company

/s/ Hugh Steven Wilson

Hugh Steven Wilson

Managing Director

0000936392-08-000778.txt : 20081223 0000936392-08-000778.hdr.sgml : 20081223 20081223145507 ACCESSION NUMBER: 0000936392-08-000778 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20081223 DATE AS OF CHANGE: 20081223 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ONLINE RESOURCES CORP CENTRAL INDEX KEY: 0000888953 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 521623052 STATE OF INCORPORATION: DE FISCAL YEAR END: 1208 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-56437 FILM NUMBER: 081267003 BUSINESS ADDRESS: STREET 1: 4795 MEADOW WOOD LANE STREET 2: SUITE 300 CITY: CHANTILLY STATE: VA ZIP: 20151 BUSINESS PHONE: 7036533100 MAIL ADDRESS: STREET 1: 4795 MEADOW WOOD LANE STREET 2: SUITE 300 CITY: CHANTILLY STATE: VA ZIP: 20151 FORMER COMPANY: FORMER CONFORMED NAME: ONLINE RESOURCES & COMMUNICATIONS CORP DATE OF NAME CHANGE: 19990308 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TENNENBAUM CAPITAL PARTNERS LLC CENTRAL INDEX KEY: 0001169553 IRS NUMBER: 954759860 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 2951 28TH STREET STREET 2: SUITE 1000 CITY: SANTA MONICA STATE: CA ZIP: 90405 BUSINESS PHONE: 3105661000 MAIL ADDRESS: STREET 1: 2951 28TH STREET STREET 2: SUITE 1000 CITY: SANTA MONICA STATE: CA ZIP: 90405 FORMER COMPANY: FORMER CONFORMED NAME: SPECIAL VALUE INVESTMENT MANAGEMENT LLC DATE OF NAME CHANGE: 20020320 SC 13D/A 1 a50922sc13dza.htm AMENDMENT TO SCHEDULE 13D sc13dza

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934
(Amendment No. 5)*

Online Resources Corporation

(Name of Issuer)

Common Stock, par value $0.0001 per share

(Title of Class of Securities)

68273G101

(CUSIP Number)

Tennenbaum Capital Partners, LLC
2951 28th Street, Suite 1000
Santa Monica, California 90405
(310) 566-1000

(Name, Address and Telephone Number of Person

Authorized to Receive Notices and Communications)

December 23, 2008

(Date of Event Which Requires Filing of This Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box: o.

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

(Continued on the following pages)

SCHEDULE 13D


CUSIP No.		68273G101		Page		2		of		5

NAME OF REPORTING PERSONS

I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY)

Tennenbaum Capital Partners, LLC (IRS ID # 95-4759860) (1)

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP

(a) o

(b) o

SEC USE ONLY

SOURCE OF FUNDS*

CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

7,447,570 shares

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

0 shares

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

7,447,570 shares

WITH

SHARED DISPOSITIVE POWER

0 shares

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

7,447,570 shares

CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

21.9%(2)

TYPE OF REPORTING PERSON*

IA, OO


(1)		Tennenbaum Capital Partners, LLC serves as investment advisor to, inter alia, Tennenbaum Opportunities Partners V, LP, a Delaware limited partnership (“TOP”), Special Value Opportunities Fund, LLC, a Delaware limited liability company (“SVOF”), and Special Value Expansion Fund, LLC, a Delaware limited liability company (“SVEF” and, together with TOP and SVOF, the “Funds”), which are the registered holders of shares of Common Stock and/or Series A-1 Redeemable Convertible Preferred Stock (“Preferred Stock”) of Online Resources Corporation beneficially owned by Tennenbaum Capital Partners, LLC.

(2)		Based on (a) 29,342,241 shares of Common Stock of Online Resources Corporation outstanding as of November 4, 2008, as reported by Online Resources Corporation in its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2008 filed with the Securities and Exchange Commission on November 10, 2008, and (b) 4,621,570 shares of Common Stock of Online Resources Corporation into which the Preferred Stock is initially convertible, computed in accordance with Rule 13d-3(d)(1).


CUSIP No.		68273G101		Page		3		of		5

This Amendment No. 5 to Schedule 13D is being filed on behalf of the undersigned to amend the Schedule 13D filed with the Securities and Exchange Commission (the “Commission”) on November 20, 2006, as amended by Amendment No. 1 to Schedule 13D filed with the Commission on November 2, 2007, Amendment No. 2 to Schedule 13D filed with the Commission on November 5, 2007, Amendment No. 3 to Schedule 13D filed with the Commission on December 4, 2007 and Amendment No. 4 to Schedule 13D filed with the Commission on August 5, 2008 (as amended, the “Schedule 13D”), relating to shares of Common Stock, par value $0.0001 per share (the “Common Stock”), of Online Resources Corporation, a Delaware corporation (the “Issuer”). Terms defined in the Schedule 13D are used herein as so defined.

Item 4. Purpose of Transaction.

Item 4 of the Schedule 13D is hereby amended and restated in its entirety to read as follows:

The Reporting Person acquired its shares of Preferred Stock and Common Stock for investment purposes. It intends to monitor and evaluate its investment in such shares on a continuing basis.

Under the terms of the Preferred Stock, so long as 10,000 shares of the Preferred Stock are outstanding (as adjusted for stock splits, stock dividends and the like), the holders of the Preferred Stock are entitled to elect one director to the board of directors of the Issuer at each annual election of directors.

On December 23, 2008, the Reporting Person delivered to the Issuer a letter, a copy of which is attached hereto as Exhibit 8 (which is incorporated herein by reference in its entirety).

The Reporting Person and/or one or more of its affiliates (collectively, “Tennenbaum”) may purchase from time to time in open market or privately negotiated transactions additional shares of Common Stock, or options or derivatives related thereto. From time to time, one or more members of Tennenbaum may also hold discussions or otherwise communicate with the Issuer’s management, Board and other representatives of the Issuer, as well as other shareholders of the Issuer or other relevant parties, to discuss potential strategic alternatives available to the Issuer, including, but not limited to, a sale of all or a portion of the Issuer or other matters that may include one or more of the other actions described in subsections (a) through (j) of Item 4 of Schedule 13D. Tennenbaum may also seek additional representation on the Board of the Issuer or pursue other available courses of action. In addition, the Reporting Person may determine to dispose of all or a portion of its shares of Common Stock or Preferred Stock.

Except as set forth above, the Reporting Person does not have any plans or proposals which relate to, or could result in, any of the matters referred to in subsections (a) through (j) of Item 4 of Schedule 13D. The Reporting Person may, at any time, review or reconsider its position with respect to the Issuer and formulate plans or proposals with respect to any of such matters.

The foregoing description of the Preferred Stock is qualified in its entirety by reference to the Certificate of Designations of the Preferred Stock, which has been filed as Exhibit 3.1 to the Issuer’s Current Report on Form 8-K filed with the Commission on July 3, 2006
(File No. 0-26123), as amended by the Certificate of Correction to the Certificate of Designations, which has been filed as Exhibit 3.2 to the Issuer’s Current Report on Form 8-K/A filed with the Commission on September 14, 2006 (File No. 0-26123), and is incorporated herein by reference.

Item 5. Interest in Securities of the Issuer.

Item 5(a)-(b) of the Schedule 13D is hereby amended and restated in its entirety to read as follows:

(a)-(b) As of the date of this filing, the Reporting Person is the beneficial owner of 7,447,570 shares of Common Stock, which constitute approximately 21.9% of the outstanding shares of Common Stock of the Issuer, based on (i) 29,342,241 shares of Common Stock outstanding as of November 4, 2008, as


CUSIP No.		68273G101		Page		4		of		5

reported by the Issuer in its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2008 filed with the Commission on November 10, 2008, and (ii) 4,621,570 shares of Common Stock into which the Preferred Stock is initially convertible, computed in accordance with Rule 13d-3(d)(1). TCP has sole voting and dispositive power over the shares.

Item 7. Material to be Filed as Exhibits.

Item 7 of the Schedule 13D is hereby amended and supplemented by adding the following at the end thereof:


Exhibit 8		Letter, dated December 23, 2008, to the members of the Board of Directors of the Issuer.


CUSIP No.		68273G101		Page		5		of		5

SIGNATURE

After reasonable inquiry and to the best of such Reporting Person’s knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct.

Exhibit Index


Exhibit 8		Letter, dated December 23, 2008, to the members of the Board of Directors of the Issuer.

EX-99.8 2 a50922exv99w8.htm EX-99.8 exv99w8

Exhibit 8

[Tennenbaum Capital Partners Letterhead]

Board of Directors of Online Resources Corporation
c/o Mr. Matthew P. Lawlor, Chairman & Chief Executive Officer
4795 Meadow Wood Lane
Chantilly, VA 20151

December 23, 2008

Dear Fellow Directors:

I am writing in my capacity as Managing Partner of Tennenbaum Capital Partners to explain our belief as to how the Board should proceed to maximize shareholder value going forward. None of what we have to say should come as a surprise. We believe that virtually all stockholders share our deep concern over the steep decline in the Company’s share price and the growing challenge of operating a small standalone company in a difficult competitive environment.

As you know, our funds, in the aggregate, are ORCC’s largest investor, beneficially owning slightly below 22% of the outstanding shares of common stock (after giving effect to the conversion of our preferred shares). We are committed to achieving value for our investors and for all the shareholders of the Company.

During the past year, we have regularly increased our position in the Company’s common stock because we believed in the Company’s fundamental value proposition. Our investment thesis had two key themes: (i) the Company would achieve strong execution of new product rollouts, integration of acquired businesses, and would continue to drive top line growth; and (ii) the Company would be an attractive acquisition target in any economic environment. After too many instances of revising earnings guidance downward, we strongly believe that execution alone (which has been far from flawless) will not drive sufficient shareholder value to produce an attractive return over a reasonable time frame. Accordingly, we believe that ORCC must work proactively toward one or more consolidating transactions, in parallel with improved operational execution.

Toward that end, we are asking the Board to take four complimentary steps: (1) appoint a Special Committee (which would include me) to oversee all future M&A activity, to assure that management does not exert undue (and negative) influence over consolidation opportunities and to eliminate any possible “filter” between potential acquirers and the Board, so that the Board can fulfill its duties with respect to any consolidation opportunities; (2) consistent with best practices in corporate governance, take appropriate steps before or in connection with the next annual meeting of shareholders to decouple the CEO and Chairman positions (to improve corporate governance and to eliminate any possibility of bias or undue influence as it relates to potential M&A opportunities) and eliminate the out-moded, shareholder unfriendly structural obstacles to changes in control – particularly the staggered board; (3) publicly acknowledge the fact that the terms of our preferred instrument preclude the adoption of any sort of poison pill “rights plan” without our consent and (4) with respect to the upcoming election of directors, seek out and nominate truly independent candidates who would add value to the Board in the context of considering all strategic alternatives. We do not rule out nominating some candidates and/or sponsoring a contested election. To be clear with

respect to point (3) above, we will aggressively assert all legal remedies available if the Company attempts to institute any rights plan or any other transaction in breach of our rights and preferences contained in the Certificate of Designation for our Series A-1 Preferred.

Here are some further comments on each point.

Consolidation is essential.

	•		The financial technology industry has seen aggressive consolidation over the last three years and at very nice valuations. As the largest shareholder, no one wishes for a return to “yesterday’s” valuations more than us. We, and all shareholders, would happily cheer for multiple expansion and would love to be rewarded for higher relative multiples for our higher relative growth. But unfortunately, we are a small-capitalization company with limited financial resources and high execution hurdles.

	•		While the historic M&A multiples may no longer be relevant in the current environment, the synergy potential with a strategic acquirer could drive real value to shareholders because it would allow an acquirer to pay significantly above the current multiple for these synergies. One only need study many of the M&A transactions since 2005 in this sector to appreciate the value creation that can occur. This point was well demonstrated by Fiserv, which acquired our larger competitor Checkfree in December 2007, and publicly reported revenue and cost synergies that approximated (according to our estimates) close to a 60% increase in the acquired Checkfree EBITDA. Our “scarcity” value and the synergy potential resulting from consolidation continue to underlie our optimism for the Company’s value. The Board should be very mindful to take advantage of strategic opportunities and not imprudently squander this “scarcity” value.

Oversight of M&A activities belongs with the Board – not with management.

	•		We are deeply concerned that management has consistently underestimated the execution risks for a small cap company in what is increasingly becoming a large cap world. Likewise, ORCC’s “scarcity” value as the last remaining publicly-traded online bill pay vendor (a primary investment theme for us and I suspect most other shareholders) is, in our view deteriorating with time. We acknowledge management is likely to vehemently disagree with our position, but their unrealistic optimism should not cost shareholders significant opportunity costs and missed value creation.

	•		Moreover, senior management’s apparent “just say no” approach to M&A overtures, coupled with unrealistic valuation assumptions represent a deliberate decision to thwart any consolidation efforts for reasons that are not clear to us. Given that roughly 5% of the Company’s equity is held by management and Directors, we believe that shareholder interests are being poorly served. The

decision to merge, sell or restructure the Company is the clear province of the Board. As such, the Board is entitled to an unvarnished account of any and all communications from parties interested in such a transaction, and should not be subject to having such communications filtered through a person who has a clear personal interest in maintaining the Company’s independence.

The Board needs to add independent members.

	•		Specifically, the Board needs to seek out accomplished individuals with sector and transactional expertise, as well as significant public company board experience, who can help maximize economic outcomes.

	•		For the reasons described above, it is critical that the Board choose its financial and other advisors. Those advisors should report to the Board, and not to management, who may have an interest in steering the advisors’ analysis in a particular direction.

Let me be clear: we do not characterize ourselves as “activist” investors and it is with some reluctance that we have decided to become more active with respect to ORCC. It is our sincere hope that the Board will seriously consider this letter and engage with us in a dialogue on its merits. We want to make clear that, although our Series A-1 Preferred is, by its terms, puttable at an attractive price upon any change of control, we are not “sellers at any price.” We are the largest common shareholder and seek, as all other common shareholders, to maximize our value on this investment, taking appropriate account of the value, timing and execution risks for any proposed transaction or initiative. Given our bullish view on consolidating transactions, we would consider rolling our preferred investment into such a transaction (and are open to re-characterizing the form of our security into something else mutually agreeable to us and an acquirer) and/or providing other financing support to facilitate a desirable outcome for shareholders.

Finally, as noted in our Schedule 13D filing, we may continue to buy additional shares of the Company, either in the open market, or in privately negotiated transactions, and believe at current prices, the stock of the Company provides a compelling value. We have significant value expectations for this business and hope that management can execute through the terrain of 2009. In addition, we are very bullish on the industry, particularly, for all the reasons noted above, when fueled by the synergy potential of consolidating transactions. I can be reached at (310) 566-1039 to discuss any of the matters above.

Sincerely,

/s/ Michael Leitner

Michael Leitner
Managing Partner
Tennenbaum Capital Partners