Conditional Centrix Sale Approved by Court; Sutton to Retain Some Ownership but Have No Operational Position
DENVER -- Credit unions with Centrix Financial subprime loans in their portfolio were hopeful last week that a bankruptcy court's tentative approval of the company's sale might improve service performance. "The final changes made in the settlement appear to alter service agreement terms and for some credit unions that might prove helpful and for others it could be worse," projected one West Coast CEO whose CU has sharply reduced its subprime holdings. The key, he said, is whether the new East Coast investment firm, Kendrick CF Acquisitions, buying Centrix could upgrade service, which some CUs have questioned in light of the NCUA fallout.
However, at a hearing last week U.S. Federal Bankruptcy Judge Elizabeth E. Brown approved the sale to Kendrick on condition that CU interests approve final terms, a development attorneys expect prior to a final Feb. 1 ruling.
Kendrick is the designated name for an insider group that includes senior lender Falcon Investment, Everest Reinsurance Holdings of Liberty Center, N.J., and Robert Sutton, the founder/CEO of Centrix.
Under terms approved by Judge Brown, Falcon will receive 70% of Centrix' new equity, Everest Reinsurance will receive 25% and Sutton will get 5%.
Also, under the transaction, Kevin Barry, executive vice president who has been serving as acting CEO since Centrix filed for Chapter 11 bankruptcy Sept. 19, will become CEO succeeding Sutton on Feb. 1.
Sounding an optimistic note for the company's future, Barry issued a statement last week noting the company's business model has changed and "there are no plans to re-establish the loan origination aspect of our operation and to focus solely on the loan servicing side."
"We are very excited by the opportunities this transaction will create," said Barry. "We have all worked hard to negotiate an agreement to continuing loan servicing for our $1.7 billion existing portfolio made up primarily of loans held by our credit union partners."
Centrix now, he said, is "focused on providing a best-in-class organization striving to deliver operational excellence and high customer satisfaction."
At the Feb. 1 closing, he added, "I will assume the responsibilities of CEO. Robert Sutton will retain a minority ownership stake with no operational involvement."
No other companies other than Kendrick had bid on the company's assets during last week's proceedings. An earlier hearing to approve the sale was delayed when Sutton objected to a last-minute change in the purchase agreement between Centrix and Kendrick. The change included a settlement between Centrix and its creditors committee. Originally Sutton was to receive a release of all the estate claims against him, but the settlement removed that claims release. The judge overruled Sutton's objection to that language. --firstname.lastname@example.org