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C-Bass Files Bankruptcy With $1 Billion Debt After Restructuring In 2007

Credit-Based Asset Servicing Securitization LLC, a subprime mortgage investor based in NewYork, filed for bankruptcy three years after saying arestructuring had saved it from seeking for court protection.

The company listed debt of more than $1 billion and assetsof as much as $50 million in Chapter 11 documents filed today inU.S. Bankruptcy Court in Manhattan.

The company known as C-Bass is mostly owned by ResidualInterest Investments LP and MGIC Mortgage and Consumer Asset ILLC. It was among more than 100 mortgage lenders and investorsforced to halt operations or find buyers in 2007.

“During a harrowing period from July 2007 through earlyNovember 2007, the debtors entered into large-scale forbearanceand restructuring negotiations,” C-Bass Treasurer AndrewRickert said in court papers. The restructuring with MGIC, debtholders and counterparties to hedging instruments gave C-Bassforbearance agreements that allowed it to sell Litton LoanServicing LP to Goldman Sachs Group Inc. for $428 million incash, Rickert said.

Three years ago, the company said it had averted bankruptcywith new terms on more than $3.8 billion in debt in a dealinvolving Blackstone Group LP , hired in August 2007. The newfinancing in 2007 included $3.2 billion in secured debt,including about $1 billion in a syndicated bank line of credit,so-called repurchase agreements and $610 million in unsecureddebt, Bloomberg reported at the time.

‘Mortgage Crisis’

“As the domestic mortgage crisis spread beyond the’subprime’ sector to encompass the entire residential mortgagemarket and deepened by an order of magnitude that no one couldhave predicted,” C-Bass realized it wouldn’t be able to meetthe terms of its 2007 agreements, Rickert said in court papersfiled today.

“We appreciate the cooperation we have received from oursyndicated bank line in winding up C-Bass operations and affairsin an orderly fashion” Peter S. Partee , an attorney for C-Bass,said today in a phone interview.

The outstanding principal balance on C-Bass’s senior creditfacility as of today was about $170 million, exceeding thecurrent fair market value of the remaining collateral, accordingto court documents.

Unsecured Creditors

C-Bass’s largest unsecured creditors include Whole LoanTrust 2010, as assignee of Commerzbank AG, with a claim of$174.9 million; Wilmington Trust 2005-I, with a $128.8 millionclaim; and Alpine Securitization Corp., with a $108.5 millionclaim.

The company plans to seek permission to use cashcollateral, pay employees and pay certain

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