Cetera’s Parent to File for Bankruptcy

RCS Capital Corp, the troubled parent company of independent brokerage conglomeration Cetera Financial Group, said Monday afternoon that it plans to file for prearranged Chapter 11 bankruptcy and receive an additional $150 million of working capital from a majority of its lenders.

The announcement by the firm, which includes 10 separate broker-dealers rapidly assembled  by embattled private real estate investment trust mogul Nicholas Schorsch to sell his securities, appears to indicate that RCS could not find a buyer.

RCS, which has roughly 9,500 independent advisors under the Cetera umbrella, said it expects its brokerage units to operate as usual pending the bankruptcy filing in late January. It also says in the release that it plans to offer a new proposed equity retention program for Cetera advisors and key employees.

“Current employees, advisors and trade vendors will not be affected by RCS Capital’s bankruptcy,” it said in a news release filed with the Securities and Exchange Commission. “As such, it is expected to remain business-as-usual for Cetera’s employees as well as the advisors and the institutions that Cetera supports.”

RCS has been mired in losses since a prominent publicly-traded REIT founded by Schorsch announced in October 2014 that it had filed misleading financials. Monday’s announcements will restructure its debt and balance sheet to focus on its retail advice division, the statement said.

In early November, Chief Executive Officer Lawrence “Larry” Roth said on an internal conference call that Cetera was fielding bids from at least six potential borrowers, including private equity, according to InvestmentNews. That followed the withdrawal of private equity firm Apollo Global Management from a deal to invest $25 million in RCS and buy its wholesaling REIT sales business.

Monday’s release said Roth will continue to lead Cetera’s management team.