National Century Financial, a privately held company that packages health care receivables as securities, filed for Chapter 11 bankruptcy Monday after bondholders and ratings agencies accused it of diverting money it had set aside to back up its bond obligations.
The bankruptcy, which threatened to complicate the health care financing landscape and hurt the owners of its $3.35 billion in debt, was filed in Columbus, Ohio, according to published reports, and came one day after the FBI raided the company's offices, seizing accounting statements and computer records.
A new chief executive hired from New York turnaround specialist Alvarez & Marsal, said the company had enough money to operate through mid-December, according to
Since last month, National Century had seen its credit ratings cut 12 levels and its chairman, Lance Poulsen, resign. Moody's said the company diverted funds designed to protect bondholders to provide more financing when its own financial situation deteriorated.
Since the early 1990s, National City claims to have purchased $15 billion in receivables, securitizing them with the advice of CSFB and selling them to institutions including Pimco, Alliance Capital and the UBS PaineWebber fund group.