Consumer lender Curo files for bankruptcy to cut $1 bln in debt

Curo group

25/03/2024 21:55

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      Company has $2.1 billion in total debt
    

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      Operates Covington, First Heritage, Heights Finance brands
    

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      Curo offers loans to lower-income consumers in US and
Canada
    

  
    By Dietrich Knauth
       March 25 (Reuters) - Consumer finance company Curo Group
filed for bankruptcy protection in Texas on Monday, aiming to
complete a restructuring that would eliminate $1 billion in debt
and hand control of the company to its lenders.
    The Chicago-based company owes $2.1 billion to a group of
investment funds that include Oaktree Capital Management,
Caspian Capital and Empyrean Capital Partners. About
three-quarters of its lenders support its restructuring plan,
and Curo intends to build on that support to complete its
bankruptcy restructuring within 120 days, the company said
Monday.
    "The significant support we have received from our lenders
and stakeholders will allow us to move forward expeditiously as
we continue to provide our customers with a variety of
convenient, easily accessible financial services," Curo CEO Doug
Clark said in a statement.
    The company primarily provides short-term loans to U.S. and
Canadian consumers who make between $10,000 and $60,000 a year.
It operates under several consumer-facing brands, including
Covington Credit, First Heritage Credit, Heights Finance,
Southern Finance, Quick Credit, Cash Money and LendDirect.
    Curo stumbled in recent years during an attempt to
transition its business to focus more on longer-term,
higher-balance and lower-interest rate credit products that
carry less regulatory and reputational risk than its
higher-interest legacy offerings, according to court documents
filed Monday. 
    Curo has been sued by U.S. regulators over some of its
legacy loans, with regulators taking aim at an alleged practice
of "churning" short-term loans into high-cost, long-term debt
through repeated refinancing. Curo denied those allegations, and
said that the loans were originated before Curo bought the
company that issued them. 
    As part of its pre-bankruptcy restructuring, Curo took on
debt to acquire Heights Finance and First Heritage, and it sold
off some of its brands that focused on short term, higher credit
risk loans, including Speedy Cash, Rapid Cash, Avio Credit and
Flexiti.
    The sale of Flexiti generated just $63.7 million, and the
lower-than-expected result caused a cash crunch for Curo,
according to court documents. Curo had acquired Flexiti for
$113.4 million in 2021, and it invested $227.5 into the business
after acquiring it, according to court documents.
    As money grew tight, Curo missed $35 million in debt
payments due in February, and its stock was de-listed from the
New York Stock Exchange on March 11.   
    Curo intends to finance its restructuring with a $70 million
bankruptcy loan financing provided by a group of its existing
lenders.
    The company had $672 million in total revenue in 2023, and
it has 2,856 employees in the U.S. and Canada, according to
court documents.
    The case is In re Curo Group, U.S. Bankruptcy Court for the
Southern District of Texas, No. 24-90165
    For Curo: Sarah Schultz and Patrick Wu of Akin Gump Strauss
Hauer & Feld 
    
    Read more: 
    Curo Group subsidiary sued by US regulator for 'churning'
consumer loans

 (Reporting by Dietrich Knauth in New York)
 ((Dietrich.Knauth@thomsonreuters.com;))