NU Online News Service, Oct. 21, 2003, 12:33 p.m. EDT – The Thaxton Group Inc., Lancaster, S.C., a life insurance agency and consumer loan company, has filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.
Thaxton still has enough money in the bank to support its operations, but a “spate of lawsuits” and an increase in loan defaults at the Tico Credit consumer loan unit have forced the company to seek legal protection while it restructures its obligations, the company says.
Thaxton, founded in 1950, has about 1,000 employees and more than 200 offices in 11 states.
Earlier this month, Thaxton told the U.S. Securities and Exchange Commission that the company’s second quarter financial statement showed $1.6 million in net income but should have shown a net loss of at least $100,000.
The second quarter net income figure was wrong because Tico Credit failed to account properly for delinquent loans, Thaxton said in the SEC filing.
Thaxton noted that it owed $110 million to The FINOVA Group Inc., Scottsdale, Ariz., and $123 million to public investors who had bought its subordinated notes. Thaxton is supposed to make monthly payments to FINOVA, and it is supposed to pay $40 million to its noteholders by the end of the year.
Thaxton began trying to sell the Tico Credit unit in September, Thaxton said.
“We currently expect that a sale of Tico should produce substantial cash proceeds,” Thaxton said. “However, we cannot be certain whether the proceeds will be sufficient to repay our outstanding indebtedness to FINOVA or whether any of the proceeds will be available to repay a portion of our indebtedness under our subordinated notes. We do not expect the sale proceeds will be sufficient to pay our subordinated notes in full.”
Thaxton said that it was in default on its agreements with FINOVA, but it added that it still has about $21 million in cash to fund ordinary operations.
Now that Thaxton has filed for Chapter 11 protection, it hopes it can put its problems behind it, according to Jim Thaxton, the company’s chief executive officer.
“Restructuring means planning for the future,” Thaxton says. “A future where we can serve our customers.”
A report discussing Thaxton’s status is on the Web at http://www.sec.gov/Archives/edgar/data/1001430/000119312503057415/0001193125-03-057415-index.htm