Another S.C. company that financed its loan business by selling high-risk junk bonds has filed for bankruptcy protection.

The Thaxton Group of Lancaster took the action late Friday in U.S. Bankruptcy Court in Delaware, where it is incorporated.

The company’s Chapter 11 filing listed $242 million in debts and $206 million in assets. It said it wants to repay creditors by staying open and selling its car loan business.

In a statement late Monday, James Thaxton, chief executive officer, called the filing a temporary setback.

“Unlike some previous institutions, The Thaxton Group has money in the bank to conduct our day-to-day business,” he said. “Restructuring means planning for the future; a future where we can serve our customers.”

At least 2,300 S.C. residents are among the 3,773 investors who bought $120 million in junk bonds — notes offering higher-than-usual rates of return but carrying a high risk of losing money. The company stopped making payments to bondholders Sept. 29.

Its bankruptcy filing is the second this year among South Carolina companies that sold junk bonds to raise money for loans.

Columbia-based HomeGold Inc. and its Carolina Investors subsidiary, which filed for bankruptcy in the spring with $300 million in debt, are being liquidated. Investors in HomeGold and its subsidiary might receive 8 cents on the dollar.

Thaxton investors might lose some money, but they are likely to get substantially more than the people who bought junk bonds from Carolina Investors, said Robert Dunn, a Charlotte consultant hired by Thaxton for crisis management.

Thaxton officials will ask a U.S. bankruptcy judge in Wilmington, Del., today to prevent utilities from turning off the lights in its offices and to keep other creditors at bay.

Those measures will let Thaxton run its loan and insurance offices as usual while it seeks the best price possible for Tico Credit, which the company began trying to sell in September after it realized its losses were mounting.

Tico offers loans to credit-impaired borrowers using their cars as collateral. The weak economy resulted in borrowers defaulting at higher-than-expected rates, the company said.

To finance its lending operations, Thaxton borrowed money itself. Its junk bonds paid 6.5 percent to 12 percent interest and came due from one day to five years.

Thaxton’s bondholders are near the back of a long line to be repaid:

• ; The bankruptcy judge will ensure that the company’s 1,033 employees are paid first.

• ; Trade creditors also will be paid.

• ; And proceeds from a sale of Tico must first be used to pay off Thaxton’s senior lender, Finova Capital Corp. of Phoenix, which is owed $110 million.

Dunn said he doesn’t know how long it will take to sell Tico. “We hope it will only be a matter of months.”

S.C. Attorney General Henry McMaster opened a preliminary investigation early this month to determine whether Thaxton clearly told investors the extent of the risks of buying their junk bonds.

McMaster did so after Thaxton officials froze trading on the bonds, and said they would be restating second-half results from a $1.6 million profit to an estimated loss of $100,000 to $200,000.

That investigation is continuing, McMaster’s spokesman Trey Walker said Monday.

McMaster is also conducting a civil and criminal investigation into HomeGold.

Like Thaxton, Pickens-based Carolina Investors sold junk bonds to finance the parent company’s cash needs. But Carolina Investors sold its bonds within South Carolina, allowing it to avoid registering the bonds with the U.S. Securities and Exchange Commission.

Thaxton’s bonds were registered with the SEC because they were sold in several states.

Reach DuPlessis at (803) 771-8305 or jduplessis@thestate.com