American Business Financial Services abandons reorganization effort, to liquidate instead

New York, April 4 - American Business Financial Services, Inc. abandoned its attempts to reorganize and said that it will cease operations and dispose of its assets through a Chapter 11 liquidation.

The Philadelphia-based financial services company closes its office in Texas on Friday and said it would close its other offices in California and Maryland on Monday. Layoffs in Philadelphia will start April 11 and the headquarters will be closed by the end of July.

Chief restructuring officer David Coles of Alvarez & Marsal said he and his team and worked with American Business Financial's senior management and advisors on options to maximize recovery for creditors.

"As a result of this analysis, it became clear to us that the cash requirements to create a sustainable operation were significantly greater than the company's available funding," Coles said in a news release.

"Therefore, the board of directors and I reached the conclusion that the best course of action for the Chapter 11 estate and creditors is to wind down the company in an orderly manner.

"This was an extremely difficult decision," Coles added. "We regret the impact it will have on the company's constituents, particularly its employees, who have been very patient, loyal and understanding during the company's recent financial difficulties. We wish there were a viable alternative that would avoid a wind down of the company, but we believe this option offers creditors the best prospects for recovery."

Pending mortgage loan commitments and conditional approvals will not be affected, nor will existing loan customers.

The company's portfolio of loans currently held for sale is expected to be sold to one or more buyers as part of the liquidation process.

Coles said he plans to meet secured noteholders and the unsecured creditors to seek their support for the liquidation.

American Business also said that the U.S. Bankruptcy Court for the District of Delaware approve the sale of its servicing operations to Ocwen Federal Bank FSB, the stalking horse bidder, for $20.27 million. The sale is expected to close by May 2. The bid is made up of the $22.64 million full value of the advance receivables, less a $6.49 million inducement fee for assignment of servicing rights and other adjustments.

American Business Financial filed for Chapter 11 on Jan. 21. It listed assets of $1.084 billion and liabilities of $1.072 billion. The company's Chapter 11 case number is 05-10203.

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