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RCS Capital Prepackaged Chapter 11 Bankruptcy

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According to the U.S. Bankruptcy Court docket, RCS Capital (pka 405 Holding) and ten affiliated Debtors filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 16-10223.

The Company, which is the parent holding company for subsidiaries that provide investment services, is represented by Robert S. Brady of Young Conaway Stargatt & Taylor. Concurrent with its Chapter 11 petition, the Company also filed a Joint Plan of Reorganization, but a Disclosure Statement was not yet filed. On January 4, 2016, the Company announced that it had reached an agreement in principle with certain of its key stakeholders for a new investment of $150 million and the restructuring of its debt and capital structure.

This agreement, which is supported by a steering committee of first- and second-lien lenders representing a majority of the principal amount outstanding, will allow the Company to restructure its debt and balance sheet and to focus on its retail advice division: Cetera Financial Group. The Company expects the restructuring to position Cetera for long-term profitable growth under its existing senior management team, which will continue to be led by R. Lawrence “Larry” Roth as Cetera’s C.E.O.

According to a corporate release, the purpose of the Chapter 11 filing is to improve RCS Capital’s balance sheet and capital structure by eliminating certain non-core assets and liabilities. The restructuring will eliminate the common and preferred equity of RCS Capital. Other than the new proposed equity retention program for Cetera financial advisors and key employees, substantially all of the equity of the Company following the restructuring will be owned by the current first- and second-lien lenders.

Roth comments, “RCS Capital’s announcement today defines the path for transforming Cetera into a private, independently run organization that is dedicated exclusively to the financial advisors and financial institutions we support. The restructuring marks a fresh start that will place the issues of the past months firmly behind Cetera, while providing the financial advisor network with the capital and operational structure to profitably grow its market leadership.”

 

Read more RCS Capital bankruptcy news.