A federal judge has approved RCS Capital Corp.'s bankruptcy plan, paving the way for its Cetera Financial Group, its largest asset, to emerge as a privately held company.
U.S. bankruptcy judge Mary Walrath in Wilmington, Del., issued the order Thursday, confirming the Chapter 11 bankruptcy plan.
The main asset of RCS Capital, or RCAP, is the Cetera network of 10 broker-dealers that are home to 9,000 financial advisers. As the RCAP bankruptcy is drawing to a conclusion, Cetera is undergoing a broad restructuring and beginning to consolidate some of those firms into others.
The new owners of the revamped company are its debt holders, which include such financial institutions as Fortress Investment Group, Carlyle Investment Management and Eaton Vance Management.
Cetera's CEO Larry Roth last month said those institutions have indicated they will be in the business for
the long haul.
"We're excited by this final step toward the company's successful exit from the Chapter 11 process, and its emergence as a Cetera-only organization that is privately owned, independently managed, and well-positioned for long-term success in serving financial advisers and financial institutions,” David Orlofsky, chief restructuring officer of RCAP and senior managing director of Zolfo Cooper, said in a statement. “We expect formal emergence from the restructuring process to follow soon, at which time Cetera will have further public comment.”
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RCAP filed for bankruptcy protection at the end of January.
RCAP was
bloated with hundreds of millions of dollars in debt after a broker-dealer buying binge by its former controlling shareholder, Nicholas Schorsch, who is no longer involved in running the company.
The purpose of RCAP's Chapter 11 bankruptcy was to improve the company's balance sheet, reduce debt and dump certain non-brokerage assets.
