Future uncertain for Reagor-Dykes Auto Group after recent ruling
Any day now, vehicles could start disappearing from Reagor-Dykes lots. A ruling by Judge Robert Jones allowed Ford Credit to recoup its collateral.
Any day now, vehicles could start disappearing from Reagor-Dykes lots. A ruling by Judge Robert Jones allowed Ford Credit to recoup its collateral. The auto group argued at a hearing last week that this decision would shut down the business.
On July 31 Ford Motor Credit filed suit against Reagor-Dykes Auto Group, claiming massive fraud. It was later described as perhaps one of the largest floor-plan-financing frauds in U.S. history. The next day several Reagor-Dykes companies filed for Chapter 11 bankruptcy protection.
Over the next several months, there was hearing after hearing at the federal courthouse. Most of these hearings extended the use of cash collateral to keep the business open. That is money put up by Ford Motor Credit.
In late August a chief restructuring officer took over day-to-day operations. His goals were to keep a bare-bones business operating with minimal sales, while resolving TT&L and trade-in problems, and also searching for a way to maximize the estate. The greater the value realized for it, the more available to the long list of creditors.
In September Judge Jones approved a bid process. KamKad Auto Group emerged as a leading bidder. But by late November, the sale fell apart. Court testimony later showed after due diligence, prospective bidders lowered the price. No deal was reached. The Reagor-Dykes team pivoted to reorganization.
In January, right after the auto group stated, "It's not dead", it filed a reorganization plan led by the McDougal-Dykes-Ewing Group. Attorneys for the auto group said this plan provides the most value to everyone included. This includes creditors, consumers, current and former employees, and the Lubbock community as a whole. Ford Credit argued it is "too little too late".
On Thursday Judge Jones ruled Ford Credit is allowed to repossess its vehicles. He writes the value of inventory is nowhere near the $112 million the auto group owes to Ford Credit.
Earlier testimony pegged the inventory's worth between $60 million and $70 million, while Reagor-Dykes schedules it at $90 million. Both Ford and Reagor-Dykes agreed those idle vehicles, which sat through the blazing summer heat and now through the snow and wind of winter are losing value; perhaps by a percent or two a month.
The judge concluded Reagor-Dykes does not have a reasonable possibility of a successful reorganization within a reasonable time.
At the last hearing, an attorney for the auto group told the judge if he provides this relief of stay for Ford Credit, essentially everything shuts down. For now, there is still more uncertainty for the hundreds of customers with unresolved issues.