RCS Capital Files Chapter 11 Bankruptcy

by San Antonio Attorney

RCS Capital Corporation, a brokerage firm, filed for Chapter 11 Bankruptcy Protection last Sunday.  It aims to create a prearranged plan, calling the lenders to shell out $150 million into the Cetera Financial Group, converting it into a private company.

Last January, RCS revealed that the lenders are amenable to a restructuring deal, which enables them to invest approximately $150 million as a new source of capital into Cetera.  Cetera is considered as the country’s second large-size independent network specializing in financial advising.

Cetera, a company that also renders investment services to retail investors, did not file the Chapter 11 bankruptcy protection.

The proposal of RCS Capital’s debt that is supported by its lenders aims to erase the common shares of the company.  This also includes $500 million in stocks.

The company, based in New York, lists assets of $1.95 billion and a total debt of $1.39 billion, according to the court documents filed through the Bankruptcy Court in Delaware.

The company has been busy selling assets and acquiring funds following the botched deal with another company, Apollo Global Management.  The deal was supposed to purchase a controlling stake in trust funds with $19 billion worth of real estate holdings from Nicholas Schorsch, a RCS founder.

The major shareholders of the RCS Company include the Luxor Capital Group and Scorsch, according to the filed court papers.  RCS Company was lambasted by the public due to an exposed accounting discrepancy revealed by a related company.

The broker-dealer firms governed by Cetera will not be included in the bankruptcy filing and it will not affect Cetera’s current workers, financial advisers and its trading vendors.

The holders of first and second lien, large-scale investors and financial institutions will serve as the majority owners of the company after restructuring.

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