“We’re pleased with the strength of our financial performance and balance sheet since our emergence from the restructuring process," a Cetera spokesperson said. "Like all healthy companies that seek to sustain their trajectory of success, we continuously examine ways to enhance our capital management structure to best align it with our ability to reinvest in our business and create added value for our advisors and other stakeholders.”
Ownership of Cetera, one of the largest networks of independent broker-dealers, has changed hands several times in the last four years. In January 2014, Nick Schorsch’s ill-starred Realty Capital paid an eye-popping $1.1 billion to purchase Cetera from Donald Marron’s Lightyear Capital. A year later, Realty Capital became mired in an accounting scandal and Schorsch's debt-laden empire collapsed, taking Cetera with it.
One investment banking source said at least one of these firms pushed Cetera's board to explore a partial sale of their own stake. Private equity firms that once looked to exit their investments via initial public offerings are now increasingly looking at other alternatives, including keep firms private and selling equity positions among themselves.
This allows them to mark up the value of their investments. Given that Cetera reportedly has performed surprisingly well since emerging from bankruptcy, one or more of its investors, some of which may have viewed the 2016 equity infusion was a quick turnaround opportunity, might want to test the market, sources added.
Cetera CEO Robert Moore served as CFO of LPL Financial in 2010, when LPL, the nation’s largest independent brokerage did an initial public offering via several investment banks, including Goldman Sachs. Moore succeeded Larry Roth as Cetera CEO in 2016 shortly after the firm emerged from bankruptcy. The fact that Cetera managed to survive bankruptcy as a standalone entity is almost a unique achievement in the history of the brokerage business.
In an interview in late January, Moore said that Cetera had managed to add an impressive 784 new advisors overseeing nearly $15 billion in assets during 2017. Cetera also managed to retain 95 percent of its advisors after losing a much higher number of them during the bankruptcy process. To streamline operations he also restructured its number of B-Ds in the Cetera network, reducing them from 11 to 6.
Moore also said the firm managed to reduce its aggregate debt-to-earnings ratio by over three times. This presumably would allow it to refinance much of its debt at a far lower cost than when it emerged from bankruptcy. Moore also said the firm's restructuring was two years ahead of schedule.
All this would point to a much higher valuation for Cetera than immediately after it came out of Chapter 11.