Receivership of Automobile Dealership

Sellside M&A, Receivership, Strategic Plan

Receivership Auto Dealership Northern California

The Bottom Line: 

After taking possession of a bankrupt automobile dealership in Northern California as receiver, Stapleton Group quickly recovered 70% of the bank’s outstanding balance by:

  • Successfully selling the automobiles to a third party, which was a faster solution than the manufacturer’s buyback program or public auction, and
  • Negotiating a higher price from the buyer by strategically leveraging the auto manufacturer’s buyback obligations and the projected public auction value of the automobiles.

The Business Issue:

The auto dealership had defaulted on its floorplan loan, causing its bank to commence a collection action.  A convoluted process of receivership and bankruptcy filings ensued, during which time the assets (new vehicles) continued to depreciate.  Once the company converted to chapter 7 bankruptcy and ceased operations, Stapleton quickly facilitated a liquidation.

Genesis of Stapleton’s Engagement: 

The court appointed Stapleton as receiver to take possession and monetize the borrower’s personal property assets for the best possible recovery for the secured lender.

Obstacles and Stapleton’s Solutions:

  • The bankruptcy court originally appointed Stapleton in a restricted role as collateral agent.
    • Within the limited abilities of the collateral agent role, Stapleton quickly evaluated the auto dealership’s historical cash flows and cash projections to successfully restrict its use of cash collateral.
  • The manufacturer and bankruptcy trustee disputed Stapleton’s authority as receiver with respect to the bank’s collateral and the dealer agreement.
    • Stapleton aggressively pursued a resolution, engaging experienced counsel to assist in negotiations with the manufacturer and the bankruptcy trustee. All assets, including the rights and remedies with respect to the dealership agreement, were obtained by the receivership estate instead of the bankruptcy estate through a stipulation filed with the bankruptcy court.
  • The business’s records, including title and transfer documentation, were disorganized and incomplete.
    • Stapleton determined the status of title for the estate’s 140 vehicles, then collaborated with the Department of Motor Vehicles, legal lienholders and prior vehicle owners to resolve and complete title and transfer documentation for 20 preowned vehicles.
  • There was a pending offer from a local dealership owner, however, the borrower lacked the expertise or sophistication to close the transaction.
    • Stapleton leveraged its technical knowledge of dealership insolvency to strategically position the prospective buyer against the manufacturer’s buyback obligations and automobile auction houses to achieve the best possible recovery.
    • Stapleton resurrected the transaction with the prospective buyer and negotiated with the auto dealership’s landlord for a period of free rent for the receiver.
  • The borrower used cash collateral and illegally sold parts inventory while in bankruptcy.
    • Stapleton’s thorough forensic analysis of the inventory and cash collateral used during bankruptcy enabled the bank’s attorneys to file a successful claim in bankruptcy court.
    • The bank recouped 100% of its $200,000 as a priority claim.

View All Results

Website Designed and Built by Elimint | Log in