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Colombian payroll lender OK'd to tap U.S. bankruptcy loan

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A gavel and a block is pictured on the judge's bench in this illustration picture, U.S., June 9, 2021. REUTERS/Andrew Kelly

  • Alpha Latam agrees to lender call for restructuring chief
  • Company may use $17.5 million to fund operations for now

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Aug 4 - Bankrupt units of a Mexican and Colombian payroll lender have secured court approval to access part of a $45 million loan to fund operations during their Chapter 11 case after agreeing to install a chief restructuring officer.

During a virtual hearing on Wednesday, U.S. Bankruptcy Judge Kate Stickles in Wilmington, Delaware signed off on Alpha Latam Management LLC's request to tap $17.5 million of the full loan. A hearing on the rest of the loan will be held at a later date.

ALM, represented by White & Case is an affiliate of Mexico’s Alpha Holding SA de CV, which is not part of the Chapter 11 case. ALM and certain affiliates, which control Alpha's Colombian operations, filed for bankruptcy on Sunday with $768 million in debt following accounting errors that caused creditors to declare defaults.

The bankruptcy loan is being provided by existing noteholders. Stickles’ approval followed an initial hearing on Tuesday in which the noteholders, represented by Cleary Gottlieb Steen & Hamilton, said ALM must bring in an independent chief restructuring officer to guide the bankruptcy and sale process before they would commit to the loan. The last-minute demand threatened to scuttle the loan deal, but the parties reached an agreement by Wednesday.

Though the Mexican affiliates are not in bankruptcy, the agreement calls for a CRO to be brought in for both the Colombian and Mexican sides of the business. ALM lawyer Andrew Zatz said during Wednesday’s hearing the position could be filled by one person or two separate people.

The noteholders will provide a list of candidates for the role. The company will then select its preferred candidate.

ALM and some of its affiliates filed for bankruptcy after its ability to access financing was cut off following its credit defaults. The Alpha business began in 2011 as a loan provider for low-income people and small businesses in Mexico and expanded over the years to Colombia. Many of its loans are repaid through payroll deductions. As of May 31, the company had 36,800 of those loans outstanding, totaling around $174 million.

Marcelo Messer of Rothschild Inc, the bankrupt entities’ investment banker, testified on Wednesday that the company hopes to collect millions of dollars it is owed by Colombian government agencies that process loan payments from borrowers to Alpha. But with “no assurance” that those payments will come through on time, Messer said, the bankruptcy loan is critical for covering general corporate activities, administrative expenses and intercompany loans.

ALM is planning to use the Chapter 11 process to sell its Colombian loan portfolio. The terms of the bankruptcy loan also require the parties to agree on a general strategy for the sale of the Mexican assets.

The case is In re Alpha Latam Management LLC, U.S. Bankruptcy Court, District of Delaware, No. 21-11109.

For the debtors: John K. Cunningham, Richard Kebrdle and Philip Abelson of White & Case; and Mark Collins and John Knight of Richards, Layton & Finger

For the noteholders: Adam Brenneman of Cleary Gottlieb Steen & Hamilton

Read more:

Colombian consumer lending unit seeks bankruptcy protection in Delaware

Reporting by Maria Chutchian

Maria Chutchian reports on corporate bankruptcies and restructurings. She can be reached at maria.chutchian@thomsonreuters.com.

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