Court approves bid process for Reagor-Dykes Auto Group, extends

Court approves bid process for Reagor-Dykes Auto Group, extends use of cash collateral

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LUBBOCK, Texas -

KamKad Automotive Group is expected to purchase the Reagor-Dykes Auto Group by late November, following the U.S. Bankruptcy Court's approval of the next steps in the bid process Tuesday. KamKad has brought the most aggressive offer among several potential buyers, Reagor-Dykes' chief restructuring officer testified Tuesday. As we reported earlier, KamKad is a stalking horse bidder that's emerged to buy the Lubbock-based Auto Group.

Ford Motor Credit filed suit against the Reagor-Dykes Auto Group, Rick Dykes and Bart Reagor July 31. The next day many, but not all, Reagor-Dykes companies filed for bankruptcy protection.

Chief restructuring officer Bob Schleizer of BlackBriar Advisors testified KamKad's letter of intent covers a total purchase price of more than $100 million, which includes more than $25 million cash that covers nearly everything within the business: parts, furniture and lease interest. $15 million is for goodwill / enterprise value.

Schleizer said purchase of about 2,300 vehicles in Reagor-Dykes' inventory totals around $81.5 million, based on analysis conducted Monday.

"We recognized early on this would be a sale process," Schleizer testified. 

BlackBriar continues to seek other potential bidders, looking for a better deal. Schleizer said KamKad understands the auto industry, has agreements with some auto manufacturers, and has been active purchasing dealerships. Schleizer said other bidders would not be sought, pending KamKad's signing of a purchase agreement by the end of the month.

An attorney for Gulf States Toyota explained its objection to the bid process. Manufactures must approve dealership buyers. The attorney said language will be changed clarifying the sale does not transfer the franchise agreement and Toyota must review and approve the buyer. At attorney for Ford Credit said its objection is resolved, with several benchmark dates in the process moved earlier.

Rent payments

Schleizer said his team has been able to negotiate lower rent payments for period of August through November that would be paid through an extension of an order granting use of cash collateral. Counsel for Ford Credit argued its objection to the use of its cash collateral for rent payment.

Each of the previous hearings in this case granted or extended this use of cash collateral. Schleizer said if Reagor-Dykes were to lose its facilities because of unpaid rent it could derail the dealership sale process; prospective buyers may back out if the Auto Group doesn't have facilities to operate. The attorney for Reagor-Dykes said reducing rent payment maximizes value of the estate and to creditors, by continuing operations until the Auto Group is sold. 

A complicating factor regarding rent is it involves some Reagor-Dykes companies and dealerships that have not filed for bankruptcy. Also, affiliated companies RD7 or R&D Acquisitions are the landlord for most of the dealerships. Schleizer testified his team could not find lease agreements or a clear record of money paid each month before bankruptcy filing. Payments were made to loan holder International Bank of Commerce, but without an account of how much money came from each dealership. IBC refinanced Reagor-Dykes facilities in early 2018. An attorney for IBC said if cash collateral were not approved for rent payment, it would be forced to move forward with foreclosure.

An attorney for Ford Credit said his team has asked for rental and building lease agreements, records of what has been paid, and has not been satisfied. His team and others are "entitled to know these answers", he said, also questioning protections being given to related Reagor-Dykes companies that have not filed for chapter 11.

The judge granted use of cash collateral to operate through Oct. 19. This includes rent payment as well as other expenses like employee salaries.

Unresolved transactions

Since the bankruptcy filing Aug. 1, Reagor-Dykes has not been able to take trade-ins for most vehicle sales, because of a lack of financing available. Schleizer said there is a proposed agreement in place that would allow KamKad to purchase trade-ins now, allowing Reagor-Dykes to sell more vehicles before the dealerships are sold.

Schleizer testified last month there were about 900 Reagor-Dykes customers with unresolved issues. These customers purchased or leased vehicles around the time of or just before the bankruptcy filing. Either trade-ins were not paid, titles not transferred or similar problems. Schleizer said about 100 of these transactions have been resolved, most low-dollar amounts. Some of these transactions were "unwound", essentially the consumer returned the purchased or leased vehicle. Many of the unresolved transactions involve trade-ins.

Ford Credit's attorney said though the case has only been in bankruptcy court since the start of August, noting the customer problems listed above "seven weeks is an eternity when you're a consumer."

Present in court

Rick Dykes and his attorney were in court. Like the last few hearings, Bart Reagor was not at the hearing, though his attorney was.

Attorneys for these entities and people notified the judge they were present, in order they addressed the court:
Reagor-Dykes Auto Group
KamKad Auto
Rick Dykes
Bart Reagor
Patty Sue Noel, executor of Jack Morris Ford estate for Plainview Reagor-Dykes facility
International Bank of Commerce
Gulf States Toyota
First Capital Bank
Ford Motor Credit
Vista Bank

Another hearing in this case dealing with several other outstanding issues is scheduled for Wednesday afternoon. If everything proceeds as planned with the KamKad offer, all bids would be due Nov. 12, the auction would be held Nov. 15, objections to sale must be filed by Nov. 23 and sale date would be Nov. 29.

MON: Ford Credit, GM object to certain aspects of proposed Reagor-Dykes sale
SEPT. 14: Judge sets trial date in Ford Credit lawsuit vs. Reagor-Dykes
SEPT. 14: Reagor denies Ford Credit's claim vehicles sold out of trust
SEPT. 13: Dykes: Former Reagor-Dykes CFO admits he provided false info to Ford Credit
SEPT. 11: Reagor-Dykes Auto Group requests court to allow sale of company
SEPT. 4: Reagor-Dykes Auto Group establishes process to resolve customer problems
AUG. 31: International Bank of Commerce asks for court to allow it to foreclose on Reagor-Dykes dealerships
AUG. 31: More Reagor-Dykes companies, co-owners may soon file for chapter 11
AUG. 30: Court extends Reagor-Dykes employment of CRO; officer discusses potential dealership buyers
AUG. 29 : International Bank of Commerce asks for loan payment in Reagor-Dykes case
AUG. 29: Ford Credit objects to Reagor-Dykes earlier legal team
AUG. 27: Vista Bank doubles relief request in new federal suit against FirstCapital Bank
AUG. 25: Reagor-Dykes chief restructuring officer hires new legal team
AUG. 25: GM proceeding with termination of Reagor-Dykes Floydada
AUG. 23: Landlords demand rent for Reagor-Dykes dealerships in Lubbock, Plainview
AUG. 20: Ford Credit moves ahead with suit against Reagor, Dykes, some R-D companies
AUG. 18: Reagor-Dykes bankruptcy case: Read court order following Aug. 16 hearing
AUG. 17: Auto dealer claims Reagor-Dykes owes $513,000, vehicles may be in consumers' possession
AUG. 16: Vista Bank sues FirstCapital for $6 million, claims Dykes helped perpetrate check kiting scheme
AUG. 16: Bankruptcy court allows Reagor-Dykes continued use of cash collateral, hiring of CRO
AUG. 15: Reagor-Dykes Auto Group issues written apology
AUG. 14: Loss of Reagor-Dykes Chevrolet in Floydada a potential financial pitfall for city
AUG. 14: Vehicle auction company claims Reagor-Dykes owes it $687,000
AUG. 14: Ford Credit claims Reagor-Dykes is not following court orders; court grants extension to file docs
AUG. 13: U.S. Trustee opposes Reagor-Dykes request to hire chief restructuring officer
AUG. 10: Ford Credit: Reagor-Dykes fraud may be among largest of its type in U.S. history; GM files to terminate Floydada dealership
AUG. 9: Reagor-Dykes questions former CFO’s actions; Contractor claims $700,000 due now
AUG. 7: Former Reagor-Dykes employees claim they were not paid
AUG. 6: Customers concerned over Reagor-Dykes 'unwinding' process
AUG. 6: Ford suit against Reagor-Dykes on hold while bankruptcy case proceeds
AUG. 3: Judge approves Reagor-Dykes employee pay
AUG. 2: Mayor: Downtown Lubbock growth to remain strong regardless of Reagor-Dykes future
INITIAL STORY: Ford Motor Credit sues Reagor-Dykes; R-D files for chapter 11 bankruptcy

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