Commercial Financial Services announced last week it will completely shut down all operations after the firm's asset-backed creditors said no to an eleventh-hour request for a cheaper purchase price from prospective buyer Worldwide Asset Management.
Atlanta-based Worldwide had agreed to purchase the bankrupt firm for $16.5 million, but then sought to revise its offer and change the economic terms of the servicing agreement it had previously worked out with CFS. The committee formed by the holders of $1.6 billion of CFS's outstanding asset-backed debt rejected the new terms, forcing interim CFS president and restructuring head Fred Caruso to announce that all operations would close at the Tulsa-based company effective June 23.
A company-wide email advised employees to complete their time sheets and use their trash cans to load and carry personal items out. Over 1,300 will lose their jobs as a result of the shutdown.
"Because of our ongoing losses and the inability of the potential buyers to strike a deal satisfactory to the creditor committees, I am left with the difficult decision to shut down the company effective immediately," Caruso said in a statement to employees.
A fraud investigation of CFS was initiated last fall after rating agencies received an anonymous letter that alleged CFS misrepesented itself to investors by selling its loans at inflated prices to an affiliate called Dimat. CFS was in the business of collecting and securitizing bad credit card debt.
The firm filed for bankruptcy after creditors got a court order barring CFS from drawing on one of its own bank accounts. A lawsuit initiated by employees seeking damages from an alleged "tirade" they faced last year is still pending. Both federal and state investigators continue to look into the situation at the company. - SK
