RCS Capital Reveals Latest Saviors; Lightyear-AIG Deal Talk Grows

The role of private equity firms in the IBD industry seems to be on an upswing

Cetera CEO — and former Advisor Group CEO — Larry Roth. Cetera CEO — and former Advisor Group CEO — Larry Roth.

RCS Capital (RCAP) has shared more details on how it is restructuring itself and enabling the Cetera Financial Group of independent broker-dealers to become a separate entity.

Meanwhile, speculation continues as to what will happen to the AIG Advisor Group, with at least one recruiter saying some registered reps have been told it is poised to be sold to Lightyear Capital, Cetera’s previous owner.

In regulatory filings on Wednesday, RCS Capital revealed that private-equity firms Carlyle Investment Management and Fortress Investment Group, along with asset manager Eaton Vance Management, are letting the company forgo debt payments. These entities are poised to see the money they are lending Cetera turn into equity.

This news came two days after RCAP said it planned to file for bankruptcy and that certain “key stakeholders” were set to invest $150 million in its IBD group, which includes 10 broker-dealers and some 9,000 affiliated advisors.

The latest SEC filings state that RCS Capital can keep the proceeds of its sale of Hatteras Funds, rather than using them to prepay loans. In addition, RCAP is required to present its retention plan for the Cetera advisors — who are led by Larry Roth, former head of the AIG Advisor Group — to lenders by late-Friday.

AIG Advisor Group Deal in the Works?

In 2014, Lightyear Capital sold Cetera to RCAP’s major stakeholder at the time, Nicholas Schorsch, who — after a series of scandals at the company and other firms he founded — is no longer involved in its management.

It has been widely speculated in the financial press that Lightyear is interested in buying the AIG Advisor Group, though AIG and Lightyear both declined to comment on the matter.

“I heard [Thursday] from a Woodbury rep who heard this from his regional vice president, ‘Lightyear Capital is the buyer of the AIG BDs, and the lawyers are working out the details,’ ” said recruiter Jon Henschen in an interview with ThinkAdvisor. "Plus, I've been told Valerie Brown [who used to lead Cetera] will likely be the new head of the Advisor Group ... which would be exciting."

For Henschen and others in the field, "These developments could lead to some interesting recruiting wars, which would incentivize people like me to get reps from these firms," he said.

Last month, according to Henschen, advisors affiliated with Woodbury were told that “attractive offers” had been made by several private-equity firm.

--- Related on ThinkAdvisor:

RCS Capital (RCAP) has shared more details on how it is restructuring itself and enabling the Cetera Financial Group of independent broker-dealers to become a separate entity.

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