Bankruptcy battle erupts in struggle for control of huge Claremont auto dealership.Bankruptcy battle erupts in struggle for control of huge Claremont auto dealership Insurance agent spent life savings to buy dealership The bankruptcy of a huge auto park in Claremont is shaping up as a legal struggle for control of the mega-dealerships in what one attorney calls a classic case of a leveraged buyout leveraged buyout, the takeover of a company, financed by borrowed funds. Often, the target company's assets are used as security for the loans acquired to finance the purchase. gone wrong. The battle began in February when General Electric Capital Corp., which was owed an estimated $21 million by the Claremont Auto Park Inc., forced the auto dealership and its owner, Joseph Wilson Joseph Wilson or Joe Wilson may refer to: People
In law, state of being in the hands of a receiver, a person appointed by the court to administer, conserve, rehabilitate, or liquidate the assets of an insolvent corporation for the protection or relief of creditors. . General Electric said that Wilson's firm owed $3 million immediately in the Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. Superior Court case. Wilson objected to the involuntary receivership, claiming the court-appointed financial guardian, attorney David Ray
David Ray (born May 20, 1932), is an American poet and author of fiction, essays, and memoir. , worked primarily on behalf of General Electric Capital. Wilson petitioned the bankruptcy court bankruptcy court n. the specialized Federal court in which bankruptcy matters under the Federal Bankruptcy Act are conducted. There are several bankruptcy courts in each state, and each one's territory covers several counties. to have the auto dealerships' status converted to a voluntary Chapter 11 bankruptcy from receivership. Attorneys for Wilson alleged that Ray was not trying hard enough to recoup recoup To sell an asset at a price sufficient to recover the original outlay or to offset a previous loss. the $6 million life's savings that Wilson sank into the purchase of the 15-acre auto park. The voluntary Chapter 11 filing gave Wilson, a retired insurance agency manager, an outside shot at regaining control of the auto park as the court-appointed trustee. His wish was not granted. In the latest move in the battle, the bankruptcy court appointed attorney Jeffrey Coyne trustee of Claremont Auto Park. Wilson's attorneys are expected to challenge Coyne's trustee appointment later this month, in a last ditch effort by Wilson to regain the helm of the dealership he ran for just 13 months. The tangle for control of the Acura, Cadillac, Daihatsu, Hyundai, Isuzu, Pontiac, and GMC GMC See: Guaranteed Mortgage Certificate truck dealerships adds up to big bucks. With about $100 million in sales, the Claremont Auto Park contributed an estimated 20 percent to 25 percent of the sales tax sales tax, levy on the sale of goods or services, generally calculated as a percentage of the selling price, and sometimes called a purchase tax. It is usually collected in the form of an extra charge by the retailer, who remits the tax to the government. dollars collected by the City of Claremont in 1989. For now, Coyne, a Coudert Bros BROS Brothers BROS Benefits and Retirement Operations Section (King County, Washington) BROS Barnes and Richmond Operatic Society (London, UK) . attorney who handled the bankruptcy of Pioneer Take-Out Take-out A cash surplus generated by the sale of one block of securities and the purchase of another, e.g., selling a block of bonds at 99 and buying another block at 95. Also, a bid made to a seller of a security that is designed (and generally agreed) to take the seller out of Corp., is faced with the task of turning around the collection of sister dealerships. "The challenge that hits immediately is to gain the public's confidence in the dealership," said Coyne, estimating that it could take six months to a year before he tries to get court approval for the troubled dealership. "Sales have dropped off because people generally do not understand that it is safe to deal with an automobile dealership being run by a trustee. They're not sure that we'll be around next month." One of Wilson's lawyers, Sandford L. Frey of Los Angeles-based Kadenacy & Scwhaber, said Coyne is a capable bankruptcy trustee, but he said his client bought into a bad deal when he acquired the auto dealership. "Our position is that the company was troubled when Joe Wilson bought it and he never had a chance ... Some kind of forensic accountant needs to get in there and find out what the problem was. And Wilson should have been allowed the chance to make the dealerships work," Frey said. Wilson bought 80 percent of the Claremont Dealerships in 1989 from Jack Head. After taking control, Wilson alleged that the deal was marred, in part, because of at least $2 million in uncollectable accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying . Attorneys involved in the case have said that Wilson lost $5 million to $8 million in the 13 months he ran the business. Alleging Wilson failed to make $3 million in required payments and failed to provide monthly statements to the creditor, General Electric Capital Corp. put Claremont Auto Park into receivership in an involuntary Chapter 11 bankruptcy, claiming that it was owed about $21 million. Attorney David Ray, a partner at West Los Angeles-based Saltzburg, Ray & Bergman, was appointed receiver. Frey said Wilson was "bitterly opposed to the close relationship between David Ray and General Electric Capital Corp." Frey said Chapter 11 bankruptcy was Wilson's only option in getting the dealerships out of receivership. Wilson claims Claremont's debt to General Electric increased about $2 million in the two and a half months Ray was receiver. Ray said the debt grew to help get the business back in working order. He said that while he was receiver he increased inventory at the dealership and got General Electric Capital Corp. to advanced funds to keep the dealership going. Ray told the Business Journal that he was confronted with a number of pressing financial problems when he took over, beyond the $3 million owed to General Electric Capital. About 430 vehicles were missing when he took over as receiver, said Ray. By the time he left, just 12 vehicles were unaccounted for An inclusive term (not a casualty status) applicable to personnel whose person or remains are not recovered or otherwise accounted for following hostile action. Commonly used when referring to personnel who are killed in action and whose bodies are not recovered. and most had been recovered, Ray said. "Claremont Auto Park is a classic, troubled leveraged buyout gone wrong," said Frey, "only there have been dramatic twists and there will be more." |
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