Alpha Latam Management ("ALM") and certain of its affiliates that operate its Colombian business (the "Debtors") filed voluntary petitions for relief under chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy Court for the District of Delaware. The Debtors are a technology-enabled financial services company that have historically provided consumer lending products in Colombia.
The Debtors' affiliates operating in Mexico, including Alpha Holding, S.A. de C.V. ("Alpha Holding" and such affiliates, collectively with the Debtors, the "Company") are not included in the chapter 11 filing.
Alpha Holding announced on April 20, 2021, that it would restate its financial statements for the years ended December 31, 2018, and 2019 (the "Prior Period Financial Statements to correct an error in Alpha Holding's accounting for its derivative positions. Alpha Holding also identified additional accounting errors that it anticipates will result in a restatement of other assets and other accounts receivable in its financial statements for previous years, including the Prior Period Financial Statements, or a current write-down of other assets and other accounts receivable. The accounting errors ultimately resulted in several defaults and events of default under the Company's funded debt obligations. Though the Company endeavored to negotiate forbearance and waiver agreements with several of its lenders, such efforts were unsuccessful. Given these events, the Company no longer had access to the new financing necessary to continue originating new loans, and accordingly has ceased its on-balance sheet origination activities. Today's actions became necessary despite the Company's best efforts to streamline the business by implementing significant cost-cutting measures.
To fund working capital needs, the Debtors have obtained, subject to Bankruptcy Court approval, debtor-in-possession financing for a senior secured facility of $45 million. The Debtors expect access to the debtor-in-possession financing, together with its incoming cash from collections, will provide them with sufficient liquidity to consummate a value-maximizing sale transaction of their Colombian loan portfolio.
The Debtors have requested Bankruptcy Court permission to continue operating the Colombian business without interruption to ensure that collections of all outstanding loans continue in the ordinary course. The Debtors intend to continue to act in accordance with Colombian governmental regulations, including with respect to employee benefits and severance payments associated with recent work force reductions.