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RCS Bankruptcy Appears Back on Track Following Objections

Following a series of objections that threatened to derail the restructuring of RCS Capital, the bankruptcy appears to be back on-track after a hearing yesterday in the U.S. Bankruptcy Court in Delaware.

The bankruptcy, which was announced in February and is expected to conclude this month, would allow Cetera Financial Group to emerge as a private, independent retail business with no remaining ties to Nicholas Schorsch’s legacy firm.

Judge Mary Walrath indicated yesterday that she would confirm the plan if RCS revised and narrowed the legal protection language relating to the released parties.

A similar objection was made previously by the ARC-related parties, comprised of Nicholas Schorsch, RCAP Holdings, AR Capital, and other affiliates, who stated that “the plans’ definition of released parties is so absurdly broad…that it is not only unknowable, it is unjustifiable.” The U.S. Trustee also raised an objection to the broad nature of the legal protection language.

RCS’ lender, Barclays PLC (NYSE: BCS), indicated that without such extensive legal protections, they would be left vulnerable to frivolous lawsuits.

The ARC parties were also concerned that the plan leaves them open to litigation that could result in a source of monetary recovery for the debtors.

The ARC parties said previously that, “From the moment [RCS et. al.] filed these cases, they have pushed for confirmation as quickly as possible with the twin objectives of transferring their ownership to their senior lenders and forming a Luxor-controlled litigation trust to pursue purportedly ‘valuable’ litigation claims against [us].” Luxor Capital Group is RCS’ largest unsecured creditor and the majority holder of its unsecured debt.

RCS has yet to resolve the objections raised by the ARC parties, but said that it had resolved issues raised by the U.S. Trustee.

The first and second lien lenders have voted unanimously to accept the restructuring plan, and the vast majority of unsecured creditors also voted to accept it, according to court filings.

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