El Segundo, Calif.-based Cetera Financial Group continues to untangle itself from Nicholas Schorsch’s crumbling business empire.
The holding companies of some Cetera broker-dealers will file for a streamlined bankruptcy that will allow the investment advisor network to emerge as a private entity some time this weekend, according to a source close to the firm.
The holding companies are guarantors of the debt of RCS Capital, which is undergoing its own Chapter 11 restructuring.
According to the unidentified source, the goal of the pre-arranged filing is for Cetera to emerge as a well-capitalized, independent and private company with no legacy RCS Capital obligations — the lone surviving business unit of Schorsch’s business concerns.
"We believe this is one of the last major steps needed to position Cetera Financial Group for long-term success and continued industry leadership,” said David Orlofsky, RCS Capital’s chief financial officer and chief restructuring officer, in a statement. “We're pleased by the progress we are making towards successfully concluding the restructuring process on a highly expedited basis, and we congratulate the seasoned and disciplined senior management of Cetera Financial Group on their remarkable leadership throughout this period.”
Moving forward, the firm will have no relationship with former owner Schorsch or his partners.
Cetera’s advisors and some employees will be offered retention packages, according to the source.
The unidentified source says that only parties that agree to have their claims compromised as part of the streamlined filing will be impacted, which in this case are holding companies of some Cetera broker-dealer affiliates.
Some holding companies of certain broker-dealers within the Cetera network are guarantors of RCAP’s disclosed debt, other creditors will not participate in the streamlined process and their claims will remain intact.
Cetera’s member broker-dealers and RIAs will not be involved, the source says, and there will be no impact on the company’s advisors, clients, employees or vendors.