Commercial bankruptcies over the past year have been dominated by several major retailer Chapter 11 restructurings and Chapter 7 liquidations.
Tuesday Morning, Bed Bath & Beyond and Rite Aid were among the top retailer bankruptcies in 2023. Bed Bath & Beyond and Rite Aid filed Chapter 11 with Rite Aid continuing in business.
Related: Major healthcare company defaults and files Chapter 11 bankruptcy
Bed Bath & Beyond filed Chapter 11 in April 2023, but Overstock.com bought the company out of bankruptcy and adopted part of its name for its renamed ecommerce business, Beyond. Tuesday Morning filed Chapter 11 in February 2023 and converted to Chapter 7 liquidation in July 2023.
Several restaurant chains also marched to bankruptcy court as franchisees of McDonald's, Burger King, Wendy's, Hardee's, Denny's and Popeyes also filed for Chapter 11 protection in 2023.
However, it's rare for major financial services companies to file for Chapter 11 or Chapter 7 protection. The last notable financial services-related bankruptcy was credit repair company PGX Holdings' Chapter 11 filing on June 4, 2023. But a good-sized consumer lender with retail locations has filed for Chapter 11 protection in 2024.
Curo Group files bankruptcy to restructure and eliminate debt
Consumer finance company Curo Group Holdings (CURO) and 28 affiliates on March 25 filed for Chapter 11 bankruptcy protection seeking to restructure and eliminate about $1 billion in debt after missing interest payments of $25.6 million and $11.9 million on outstanding notes on Feb. 1.
The company also filed for recognition of the Chapter 11 case as a foreign main proceeding under Canada's Companies' Creditors' Arrangement Act.
The Chicago-based debtor, founded in 1997, operates about 400 locations in 13 U.S. states under several brands including Heights Finance, Southern Finance, Covington Credit, Quick Credit and First Heritage Credit and about 150 locations in eight Canadian provinces under the brands Cash Money and Lend Direct.
Curo, which employs 2,856 employees, offers direct to consumer finance products, including installment loans, revolving lines of credit, single-pay loans and ancillary insurance products. The company also provides a several ancillary financial products, including optional credit protection, check cashing, money transfer services, car club and other related memberships. The company's products are licensed and regulated by federal and state law in the U.S. and federal and provincial regulations in Canada.
The company reported $1.77 billion in assets and $2.23 billion in debt in its petition, filed in the U.S. Bankruptcy Court for the Southern District of Texas in Houston. The debtor's top unsecured creditor in its petition is Sparrow Purchaser LLC and CCF Intermediate Holdings, owed $27 million related to litigation, followed by $4.1 million owed to Donald Gayhardt for deferred compensation plan and severance.
Curo's CEO Douglas Clark in his Chapter 11 declaration blamed several factors for the company's liquidity problems, including lower than expected proceeds from the sale of its point-of-sale consumer financing business Flexiti; litigation with the purchaser of its U.S. legacy direct lending business, Community Choice Financial; rising interest rates; the company's inability to successfully pledge certain single-pay Canada-based loans valued at $25 million and an increase in variable advance rates under its securitization facilities.
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Consumer lender will seek $70 million DIP loan
Before filing its petition, the company secured forbearance agreements and default waivers and entered into a restructuring support agreement with its term loan lenders and note holders to convert debt into equity through confirmation of a prepackaged Chapter 11 plan. The debtors believe they will obtain the necessary votes from its lenders and note holders to confirm a prepackaged Chapter 11 plan, according to Clark's declaration.
Curo will also seek court approval of up to $70 million in debtor-in-possession financing from prepetition stakeholders to fund operational needs while the debtor restructures under Chapter 11.
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