Delta Financial files Chapter 11 bankruptcy

By Caroline Salls

Pittsburgh, Dec. 17 - Delta Financial Corp. filed for Chapter 11 bankruptcy Monday in the U.S. Bankruptcy Court for the District of Delaware.

The company's Delta Funding Corp., Renaissance Mortgage Acceptance Corp. and Renaissance REIT Investment Corp. were also included in the filing.

As previously reported, Delta Financial announced its plans to file for Chapter 11 bankruptcy on Dec. 6 after a failure to complete a securitization transaction prompted defaults on its warehouse facilities.

The company had entered into a letter of intent on Nov. 15 with an affiliate of Angelo Gordon, under which the affiliate was to provide $100 million in financing to Delta Financial through an issuance of senior notes and common stock to the Angelo Gordon affiliate.

Also on Nov. 15, the company entered into a standstill agreement with three of its warehouse providers, each of which was subject to Delta Financial pricing a securitization of mortgage loans.

However, the failure to complete a securitization transaction prompted events of default on the warehouse facilities and standstill agreements.

Delta Financial said on Dec. 6 that it is in preliminary discussions with entities that are potentially interested in acquiring its assets and/or operations in connection with the bankruptcy proceeding.

As of Sept. 30, Delta Financial had $7.224 billion in assets and $7.108 billion in debt, according to a 10-Q filed with the Securities and Exchange Commission.

According to court documents, the company's largest unsecured creditors include DB Structured Products Inc., New York, with a $19.5 million claim, and HSBC Mortgage Services, Prospect Heights, Ill., with a $1.2 million claim.

In addition, chief executive officer Hugh Miller said in an affidavit filed Monday that the company had $550 million in mortgage loans outstanding as of Nov. 30.

According to an 8-K filed with the SEC, the company expects its common stock to be delisted from the Nasdaq Global Market as a result of the bankruptcy filing.

On Dec. 12, Delta Financial said it planned to terminate substantially all of its employees because of the company's financial condition and its decision to stop taking new mortgage loan applications.

Delta Financial is a Woodbury, N.Y., specialty consumer finance company. Its Chapter 11 case number is 07-11880.

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