Bankruptcy result of inability to repay loan to Carolina Investors subsidiary
By MortgageDaily.com staff
4/2/2003

A Columbia, South Carolina subprime lender has sought bankruptcy protection.

In an announcement this week, HomeGold Financial, Inc. said it has filed for Chapter 11 bankruptcy along with its subsidiary, HomeGold, Inc., in the U.S. Bankruptcy Court for the District of South Carolina.

"After carefully considering all options, we believe that Chapter 11 provides a solid vehicle to recover the maximum return on company assets," said CEO Forrest Ferrell. "Our creditors and investors will benefit from this decision."

The bankruptcy was the result of HomeGold Financial, Inc.'s inability to repay a loan to one of its subsidiaries, Carolina Investors, Inc., the company said. Investor interest in the notes and debentures of Carolina Investors, Inc. recently declined significantly, the announcement said.

Karen A. Miller, chief financial officer of HomeGold, reportedly said the bankruptcy petition did not include Carolina Investors because the company and its board of directors operated independently of HomeGold, according to the Associated Press (AP). AP also reported that HomeGold Financial told the Securities and Exchange Commission that it would not file its year-end financial results as required.

Ferrell said the company's goal is to successfully complete the bankruptcy reorganization as quickly as possible.

Multex reports that HomeGold lost nearly $30 million for the 9 months ended September 30, 2002. According to AP, the company has lost more than $100 million during the past two years.

On its website, the company says it began in 1995 and merged with HomeSense Financial in May 2000.

According to Multex, HomeGold is a specialty finance company primarily engaged in the business of originating and selling conforming and subprime first and second-lien residential mortgage loan products.

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