AUTO DEALER FILES FOR CHAPTER 11\Toyota of Simi Valley can continue selling cars.

Byline: Terry Kanakri Daily News Staff Writer

Toyota of Simi Valley has filed for Chapter 11 bankruptcy in an effort to prevent losing assets to Toyota Motor Credit Corp., which claims the local car dealership owes it $3.6 million.

The bankruptcy, filed in the Central District bankruptcy court in Los Angeles, put an end to a court order that prevented the dealership from selling or disposing of any car covered by the $3.6 million loan from its First Street lot.

Although now able to sell and remove cars from the lot, a court-appointed bankruptcy trustee will decide how revenues should be distributed to ensure that creditors are paid, an official said Wednesday.

"The trustee will determine how the revenues should be applied to the various debts of all the creditors," said Bob Wade, spokesman of Toyota Motor Credit Corp. at its Torrance headquarters. "It's not a pleasant situation. We're certainly not happy to be a litigant with one of our dealers, it's not the business we're really in. At the same time, you have to protect your interest and we have a substantial financial commitment with the dealership that needs to be recouped."

Tom and Sam Barooni, co-owners of Toyota of Simi Valley, did not return telephone calls seeking comment Wednesday. However, their attorney Lee Alpert contested the claim that Toyota of Simi Valley owes $3.6 million. He also said the dealership is not guilty of any financial irregularities as charged by Toyota Motor Credit Corp.

"Toyota of Simi Valley denies any inappropriate conduct or any wrongdoing whatsoever," Alpert said. "If there are any issues that arise based on any contractual arrangements that Toyota of Simi Valley has with Toyota Motor Corp., those issues will be ironed out through discussions that will be ironed out in the courts, and not in the press."

On Feb. 6, Toyota Motor Credit Corp., a subsidiary of Toyota Motor Sales USA, filed a civil lawsuit in Ventura Superior Court alleging Toyota of Simi Valley breached terms of an inventory loan and security agreement.

Wade said Toyota of Simi Valley failed to repay $3.6 million of a loan issued to the dealership to buy new and used cars, as well as parts and other assets. About two weeks ago, a Ventura Superior Court judge granted Toyota Credit a writ of possession.

On Feb. 7, the Ventura County Sheriff's Department enforced the court order by stationing two "keepers," on 24-hour surveillance, making sure that no vehicle left the lot, said Sgt. Noel Brown.

"We had keepers in there in the building to safeguard the property, meaning that until there was some kind of action, we wouldn't let anything happen to the property," Brown said. "They couldn't remove anything from the inventory."

The keepers left Friday, when Toyota of Simi Valley filed for Chapter 11 bankruptcy, which removed Toyota Motor Credit Corp.'s writ of possession, Brown said.

Wade said Toyota Motor Credit Corp. has been trying to recoup its money for several months after discovering financial irregularities with Toyota of Simi Valley.

Wade said that his company performed a field audit and discovered that the dealership's financial statements were inaccurate and contained fictitious cash credit entries, he said, adding the dealership also had a negative net worth of $700,000.

Wade also said that Toyota of Simi Valley was selling cars and keeping the money rather than paying off its debt.

Alpert declined to discuss Wade's claims, saying any disputes will be resolved through private discussions.

" But I can tell you that his statement regarding the financial irregularities and what he's stated is inaccurate," Alpert said. "It's a viable dealership. They service their customers well and they have produced probably $4 million a month. Their intention is to continue doing business in Simi Valley and service their clients."

Toyota Motor Credit Corp. issued Toyota of Simi Valley a 60-day notice of termination of the loan back in August, Wade said. That notice was extended at the request of the dealership to Dec. 15, and later to Jan. 31 to allow more time for Toyota of Simi Valley to secure financing.

When the loan was not paid, the company filed for a writ of possession on Feb. 6. Because of the bankruptcy filing, Toyota of Simi Valley is now obligated to pay off its debt, Wade said.

"They can proceed to do business for a period of time," he said. "All the revenues that they generate will go into a fund and will be administered by a trustee of bankruptcy and they will have to come forth with a business plan that will demonstrate that the company can recoup its positive operation."