Scorsch-Apollo deal falls apart; brokerages sold cheap
Borrowing at 12%
RCS Capital Corp., the New York-based securities brokerage cobbled together in a string of deals by Nicholas Schorsch, says Apollo Global Management LLC, the hedge fund group co-owned by Sixers owner Josh Harris, has cancelled its $378 million deal to acquire control of RCS.
Apollo will purchase RCS's Realty Capital Securities and Strategic Capital brokerage, but for only $6 million, down from the earlier $25 million price announced for RCS's wholesale brokerage group. RCS also said it will sell its Hattears Liquid Alternatives investment sales group to its managers for $5.5 milliion, pending adjustments..
RCS shares fell 40 cents by midafternoon to trade around 53 cents, a big drop from last year's $40 high. Schorsch owns around one-quarter of RCS; that stake has lost more than $750 million in value since another Schorsch-founded company, American Realty Capital Partners (later renamed Vereit), acknowledged issuing phony earnings statements last fall. Schorsch has since left Vereit which faces shareholder lawsuits and government scrutiny.
Separately, RCS said it will raise $27 million by selling promissory notes yielding 12% per year -- junk-bond rates -- with $12 million to be purchaesd by AR Capital's RCAP Holdings Inc., and $15 million by Luxor Capital Group. AR and RCAP were also founded by Schorsch. Luxor's Michael Conboy will replace Marc Rowan and Anthony Civale of Apollo Capital on RCS's board.
The company has given directors increased powers to negotiate restructuring of its remaining assets. RCS also hired Lazard Freres & Co. LLC to raise money.
Separately, Vereit last week reported it has sold Red Lobster restaurants worth $204 million as part of a total of $830 million in asset sales during the third quarter, and plans to sell another $400 million of Red Lobster restaurants. Since Schorsch and other insiders departed in the wake of the reporting scandal, Vereit has built a new management team including chief financial officer Michael Bartolotta, general counsel Lauren Goldberg and Cole Capital President Bill Miller. Shares have traded in the $8-9 range recently, far below last year's highs.