Cetera Financial on the block?

RCS Capital Corp., the struggling brokerage group cobbled together by real estate developer Nicholas Schorsch, is exploring a sale of Cetera Financial, its main operating unit, people with knowledge of the matter said. The New York-based company is seeking at least $700 million for the division, which it bought last year for about $1.2 billion, said one of the people, who asked not to be identified because the information is private. RCS is working with Lazard Ltd. to find potential suitors, the people said, with initial bids due last week. (More: How Nick Schorsch lost his mojo) RCS has been in freefall since another Schorsch venture, American Realty Capital Properties Inc., now known as Vereit Inc., disclosed in October 2014 that it intentionally concealed accounting errors. That raised questions about RCS's internal controls, and led brokers including LPL Financial Holdings to suspend sales of its investment products. Mr. Schorsch resigned from the boards of RCS and his other companies in December. “The board of directors of RCS is exploring options to raise significant capital to rationalize the RCS capital structure,” Andrew Backman, managing director at RCS Capital for investor and public relations, said in an e-mailed response to a request for comment. “These efforts are focused on positioning the business for growth and long-term value creation for all stakeholders supported by Cetera's market-leading position. The company has engaged Lazard in connection with these efforts.” A representative for Lazard didn't respond to requests for comment. (More: RCS Capital cuts due diligence team at Cetera Financial) RCS climbed 19% to $1.41 as of 1:50 p.m. in New York, reversing earlier losses and giving the company a market value of about $120 million. The stock traded at about $19 a share at this time last year. DEBT SERVICE RCS is weighing a sale Cetera because it needs to raise cash to ensure it doesn't default on its debt, according to the people familiar with the situation. It had about $742 million long-term debt as of June 30, according to its second-quarter report. In August, the firm raised $25 million for debt repayment by agreeing to sell its wholesale distribution division to Apollo Global Management, which simultaneously entered into a strategic agreement with Cetera. Cetera is a network of 11 broker-dealers offering various wealth and asset management services, according to its website. It's on track this year to generate about $100 million in earnings before interest, taxes, depreciation and amortization, or Ebitda, a key gauge of cash flow, according to one of the people.