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AZ Co. Shutting Down

Clear Choice locked out of headquarters

January 12, 2007


photo of Coco Salazar

An Arizona-based company has defaulted on its debts and is winding down mortgage operations -- leaving over 100 people unemployed.

Clear Choice Financial Inc. announced it is insolvent and in default on numerous obligations.

As a result, it has officially closed the mortgage lending offices of subsidiary Bay Capital, located in Owings Mills, Md, and Irvine, Calif., and laid off 120 employees out of an original workforce of 150, according to an announcement.

The reductions have been phased, occurring over the course of the past two to four weeks, Clear Choice Chief Executive Chad Mooney told MortgageDaily.com.

Clear Choice has additionally been locked out of its headquarters facility in Tempe, Ariz, because it is in default on its lease.

It is also in default of a note with its former Chief Executive and major shareholder Stephen G. Luke, in default of a note due to the two former owners of Bay Capital Inc. -- and Bay Capital has also been forced to shut down various warehouse lines of credit.

"The timing of our acquisition of Bay Capital coupled with a significant downturn in the mortgage lending market depleted our operating capital and we have been unable to raise additional capital to remain current on our pending obligations," Mooney said in the announcement. "We are assessing our various alternatives on a daily basis and do not know how long we can continue to remain in business."

On Monday, the company's board appointed David Birdsell as its chief restructuring officer and the law firm of Keller Rohrback as its bankruptcy, corporate and securities counsel. On Tuesday, Andrew Formato resigned from the board.

"We are exploring various options to remain in business but may be forced to declare bankruptcy if negotiations with creditors are unfavorable," Mooney added, in the written statement.

Shortly after his appointment as CEO last July, Mooney said Clear Choice had "enormous opportunity to participate in, and lead, the subprime lending and related businesses in the multi-billion dollar financial services sector."

"With Clear Choice Financial having completed the acquisitions of Bay Capital and Allstate Home Loans, we now have the platform to grow our business to meet the demand of the over $1 Trillion worth of loans coming due over the next 18 months," he said in an Aug. 2 announcement. "Our strategy moving forward will include growing [Clear Choice] through additional acquisitions and synergistic partnerships."


M&A Activity Maintains
Clear Choice Financial Inc. reported it expanded its board of directors to five positions from two on July 18 and that two days later it appointed one of the new members, Chad Mooney, as the new chief executive.

Coco Salazar is an assistant editor and staff writer for MortgageDaily.com.

e-mail: [email protected]

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