Judge approves Reagor-Dykes employee pay
A U.S. District Judge Friday approved Reagor-Dykes Auto Group use of cash to pay employees. An earlier court filing stated the company was unable to make payroll Wednesday. Payment to employees was expected before the end of the day Friday.
Bart Reagor and Rick Dykes placed $468,000 into a bank account to make payroll.
An August 16 meeting has been scheduled to review progress in bankruptcy proceedings.
An attorney for Ford Motor Credit said this is the largest bankruptcy he has seen in more than three decades of practicing law.
Representatives for Reagor-Dykes discussed possibly hiring a fraud accountant to figure out how there are major discrepancies in reported sales and inventory alleged in Ford Motor Credit's lawsuit. Representatives also discussed the hiring of a financial consultant to determine how to sell some of its dealerships.
Ford representatives have reviewed dealership operations. Regarding the possibility of continuing vehicle sales, Ford representatives said this could happen but with the requirement that a cashier's check to be presented for purchase.
Reagor-Dykes agreed to Ford's request that all demo cars handled by Reagor-Dykes, including vehicles given to Texas Tech coaches, be returned within 24 hours.
More information will be posted to this story through the day.
NEW INFORMATION FRIDAY AFTERNOON: Just ahead of a request to allow Reagor-Dykes use of cash collateral to pay its employees and to cover operating expenses, Ford Motor Credit filed an opposition to the request.
Ford's filing notes "before filing its bankruptcy petition, Debtor [Reagor-Dykes] sold or transferred a substantial number of vehicles and failed to pay Ford Credit. These vehicles total over $41 million in unpaid loan advances for which the vehicle collateral is gone. The principal balances owed to Ford Credit is approximately $116 million.
"Debtor's value of the vehicles remaining in inventory is unknown as Debtor has yet to file its Bankruptcy Schedules. However, it is nowhere near $116 million. Ford Credit estimates that the value of the remaining vehicle collateral is approximately $66 million."
The filing continues, "Ford Credit believes there is no equity in the collateral and no "equity cushion" for adequate protection."
In a sworn statement, a Ford Motor Credit employee who conducted an analysis of Reagor-Dykes sales wrote on July 31, "the information that I have reviewed to date indicates that the problems identified by my initial analysis affect all of the Reagor-Dykes Dealerships, are pervasive, and are continuing."
Reagor-Dykes Auto Group companies have filed an emergency motion requesting a hearing Friday afternoon in Federal Bankruptcy Court to allow the company to pay its employees and other operation expenses and to continue doing business. We reported Thursday multiple sources told us Reagor-Dykes could not make payroll.
Reagor-Dykes filed for chapter 11 bankruptcy protection Wednesday, a day after Ford Motor Credit sued Reagor-Dykes claiming it owes Ford more than $116 million. In a filing Thursday, the company reports it has cash available to cover payroll.
The filing states payroll was due Wednesday; because the suit was filed this week, "the Debtors did not make their payroll on August 1, 2018 and seek to get authority from the Court to pay their payroll upon approval of this Court."
The filing states total payroll due across all dealerships involved is $352,005.18. We will have a news crew at the hearing, scheduled for 2 p.m. in downtown Lubbock.
Request to use Cash
Reagor-Dykes also filed a motion to use cash collateral for 30 days to "avoid immediate and irreparable harm to the bankruptcy estates" of the company. Both the filing for an emergency hearing Friday and requesting the use of cash collateral outline various Reagor-Dykes companies involved:
- Reagor-Dykes Motors, LP operates Spike Dykes Ford Lincoln in Lamesa and Reagor-Dykes Auto Mall in Midland. These dealerships total 80 employees.
- Reagor-Dykes Imports, LP operates Reagor-Dykes Mitsubishi in Lubbock and Reagor-Dykes South in Lubbock. These dealerships have 69 employees.
- Reagor-Dykes Amarillo, LP operates Reagor-Dykes Mitsubishi of Amarillo with two locations in the city. These locations have 33 employees.
- Reagor-Dykes Auto Company, LP operates Reagor-Dykes Ford Lincoln in Plainview, with 61 employees.
- Reagor-Dykes Plainview, LP operates Reagor-Dykes Toyota win Plainview with 35 employees.
- Reagor-Dykes Floydada, LP operates Reagor-Dykes Chevrolet in Floydada with 26 employees.
Combined, the dealerships above total 304 employees. The filing notes over the last 13 years these and other dealerships within the Reagor-Dykes Auto Group have grown "into one of the largest auto groups in North and West Texas. For the last three years in a row, the Reagor-Dykes Auto Group has been recognized by Inc. Magazine as one of the top 5000 fastest growing privately held companies in the United States."
The filing shows these amounts of cash available from each respective Reagor-Dykes company:
- Reagor-Dykes Motors, LP - $78,000
- Reagor-Dykes Floydada, LP - $111,000
- Reagor-Dykes Plainview, LP - $78,000
- Reagor-Dykes Auto Company, LP - $78,000
- Reagor-Dykes Amarillo, LP - $78,000
- Reagor-Dykes Imports, LP - $78,000
Court documents show Reagor-Dykes has a 30-day budget going forward, continuing to operate the dealerships on "as much of a cash basis as possible". The company would "continue to cut expenses where possible and operate the dealerships in as efficient and profitable manner as possible under the current circumstances." This includes reducing workforce.
If the court does not grant Reagor-Dykes the use of cash collateral to continue operations, the filing states "they will undoubtedly suffer immediate and irreparable harm as the Debtors [Reagor-Dykes] will have no alternative but to close their doors, discontinue their operations and liquidate their assets. The Debtors believe that a liquidation of their assets will significantly harm not only Ford, but their other creditors. Essentially, an immediate liquidation would be a disaster for the bankruptcy estates and their creditors".
Differing Audit Results
The motion requesting to use cash collateral also shows a history of two differing audits. Ford's June 2018 audit returned not only a clean bill of health, but the dealerships "were commended on the performance the Debtors were expecting at the dealerships".
Ford conducted another audit just weeks later. In the lawsuit filed earlier this week, Ford Motor Credit claims "of sales found out of 150 reported sales, 147 of the vehicles did not match the sales and/or registration dates reported by the Texas DMV and/or other publicly-available sources."
Status of Ford Motor Credit Suit
Senior U.S. District Judge Sam Cummings placed Ford Motor Credit's lawsuit against Reagor-Dykes on hold, for now, to allow bankruptcy proceedings to move forward. There will not be a hearing August 8.
However, the order states "The Court notes that Defendants Reagor-Dykes II, L.L.C., Reagor-Dykes Auto Mall I, L.L.C., Reagor-Dykes III, L.L.C., Bart Reagor, and Rick Dykes are not included in the Suggestion of Bankruptcy and do not appear to have filed any bankruptcy petitions in the United States Bankruptcy Court."
Judge Cummings requested a response from those parties Monday.
This is the request to use cash collateral, which outlines six loans Ford has with Reagor-Dykes companies. In addition to new Ford vehicles, these loans also cover new Mitsubishi, Toyota and Chevrolet vehicles as well as used vehicles.
This is the request to pay employees and cover operating expenses.