RCS Capital will sever all ties with its founder Nicholas Schorsch when it files for bankruptcy, according to a source familiar with the situation. The pre-planned Chapter 11 bankruptcy is expected on Sunday, the source said.

The company said earlier in January it would restructure its largest holding, the broker-dealer Cetera Financial Group, with a $150 million injection of capital from lenders to convert it to an independent firm.

Read more: Cetera Bailout: Carlyle, Eaton Vance, Fortress Forgo RCS Debt Payments

To prevent an exodus of Cetera's 9,000-plus advisors, RCS has been scrambling to restructure itself. The bankruptcy will provide the most efficient manner of doing so, the source says.

"These actions continue to advance our broader plan to become a Cetera-only, independent, well-capitalized, private company, no longer burdened with legacy issues," Cetera Financial Group CEO Larry Roth said in a statement. "Our restructuring provides Cetera with a truly fresh start."

RCS Capital purchased Cetera in 2014. Not long after, RCS stock collapsed following an accounting scandal at another Schorsch-owned firm. RCS stock was delisted earlier in January.

More than two-thirds of RCS Capital first- and second-lien lenders, as well as the holders of a majority of the company’s outstanding unsecured debt, have reached an agreement on the bankruptcy terms. That agreement will maximize value available for all the company's creditors. The bankruptcy will "extinguish" all of RCS Capital's debt obligations.

Cetera advisors will continue with business as usual during the bankruptcy proceedings. The bankruptcy will impact the holding companies of Cetera's various brokerage firms, but not the firms themselves, the source says.

As guarantors of RCS Capital’s debt, the holding companies are being included in the bankruptcy in order to eliminate these guarantees without impairing or impacting any other aspect of the business, according to the source.

The advisor retention program, composed of cash and equity in RCS stock, will begin making distributions to advisors over the next couple of months, the source says.

The restructuring, Roth said in the statement, will provide "additional capital to continue to invest in the best possible platforms, products and services for the financial advisors and financial institutions we support.

"I look forward to a bright future for Cetera Financial Group and our loyal advisors, financial institutions, employees and business partners," Roth added in the statement.

When asked if the company should be referred to as Cetera or as RCS Capital, the source told Financial Planning, "I will have to get back to you on that."

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