A soft insurance market, the recession, the loss of construction clients, and ongoing litigation expenses led to Texans CUSO Insurance Group LLC to file for chapter 11 bankruptcy, the CUSO said today.
In conjunction with the Sept. 5 filing, the CUSO said its is negotiating a debtor-in-possession financing facility, which should be finalized shortly. In the meantime, the Texans CUSO Insurance said it has sufficient cash to operate and the consent of its secured lender to utilize such cash for operational purposes. If approved by the United States Bankruptcy Court for the Northern District of Texas, the DIP financing will provide an immediate source of funds to the CUSO, enabling it to satisfy on-going expenses associated with the daily operation of its business, including the timely payment of employee wages and other business related obligations.
Texans CUSO Insurance has asked the court for additional authorizations, including permission to continue to pay employee wages and salaries, to provide employee benefits without interruption, and to continue with its various customer programs.
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During the chapter 11 process, suppliers should expect to be paid for post-petition purchases of goods and services in the ordinary course of business, the CUSO said. Payments of insurance premiums and commissions to agents should also continue without interruption. Insurance policies issued through the Texans CUSO Insurance are unaffected by the filing and customers remain insured through their carriers, according to the CUSO.
Since April 2007, Texans CUSO Insurance had been embroiled in a legal scuffle between Kevin Curley, former president of the subsidiary. Curley was terminated then and filed suit for wrongful termination. In July 2008, a Texas arbitrator ruled that the firing was unjustified and Curley was entitled to $6.3 million in damages. In July of this year, Curley confirmed the judgment with Credit Union Times.
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