LUBBOCK, TX (KCBD) - In a response to Ford Motor Credit’s court filing asking for its cars and trucks back on the basis they believe there is no reorganization plan, Reagor-Dykes Auto Group filed a response saying, "Contrary to Ford Motor Credit Company LLC’s (Ford Credit) assertion that ‘there is no prospect for a reorganization,’ Reagor-Dykes is not dead. Reagor-Dykes is not out of money. Reagor-Dykes is not without a plan to restructure its debts and recapitalize its business, contrary to what is said by Ford Credit. "
Ford claims it sold 1,100 vehicles to Reagor-Dykes before the auto group filed for bankruptcy, and with the failure of the sale to a stalking-horse bidder, the group has no clear plan in place to reorganize. Ford’s motion says the company agreed to allow Reagor-Dykes to sell 72 used vehicles in November as a way to allow the auto group to continue operations. It claims the sale netted RDAG $3.1 Million in cash collateral.
As of Friday, Ford claims, Reagor-Dykes has not provided any reorganization plan and says the company cannot continue to allow the group to use their collateral to operate. The filing does say they expect the McDougal-Dykes-Ewing group to file their purchase plan before Tuesday’s court hearing.
Ford’s motion says its credit arm has “done all it can” since Aug. 1 to support Reagor-Dykes in a way that would maximize value, but with no plan in place they are asking the court to lift its stay on Reagor-Dykes assets so they can recoup their losses on cars and other collateral.
The response by RDAG today says, "On November 29, 2018, Reagor-Dykes and the McDougal-Dykes-Ewing Group said they were committed to trying to propose and have approved by this Court a plan of reorganization that, among other things, recapitalized the business, added jobs, repaid creditors some meaningful amount, helped consumers, and kept an important civic partner in West Texas. That is still the case. "
The response also says Reagor-Dykes has secured a commitment from International Bank of Commerce (subject to certain terms and conditions) to lend up to $4.75 million to get Reagor-Dykes out of bankruptcy. "This financing is the first step in a multi-step process to bring back a once-proud and productive business to West Texas. This financing will help stabilize operations and inject confidence into this Chapter 11 process and the future of Reagor-Dykes. "
The documents say Reagor-Dykes will file its proposed Chapter 11 plan with the court on Tuesday.
The plan says, “the McDougalDykes-Ewing Group will recapitalize the business with up to $20 million. That $20 million will be used to (a) revitalize/repair a business that was harmed by actions taken in early August 2018; (b) help pay unpaid taxes, title, and license fees and trade-in loans; (c) help make other payments to creditors on claims approved by this Court, including Ford Credit; and (d) provide sufficient working capital for Reagor-Dykes to exit from bankruptcy. Is there work still to be done to finalize all of the moving parts related to this complicated situation and Chapter 11 plan and get binding commitments from all necessary parties? Yes. But Reagor-Dykes and the McDougal-Dykes-Ewing Group are committed to working hard to try to get that done.”
It continues, "Sadly, Ford Credit has chosen to try to take Reagor-Dykes into fire-sale liquidation, which Reagor-Dykes think helps no one, including Ford Credit itself. This forced liquidation will only make worse the damage caused by actions taken in early August 2018, which creates a fundamental question: If Ford Credit seeks to bury Reagor-Dykes, along with the hope of any recovery and resolution to claims and concerns of most – if not all – of the creditors, consumers whose taxes, title, and license fees have yet to be paid, current and future employees, landlords, future car buyers, manufacturers, and many others, including Lubbock and its surrounding communities, then why?
"No one knows but Ford Credit. Despite Reagor-Dykes’ best efforts at a conciliatory attempt to resolve a path forward – one in which Reagor-Dykes has refrained from going on the offensive in hopes of reaching a consensual resolution – Ford Credit has shut the door. Thus far Reagor-Dykes has refrained from seeking (a) Ford Credit documents; (b) Ford Credit communications (including those between Shane Smith’s long-time friend, Gary Byrd, who is the Ford Credit employee who managed Reagor-Dykes’ account with Ford Credit); and (c) Ford Credit’s audit results (which regularly praised the Reagor-Dykes and its operational performance). Reagor-Dykes has also not sought Mr. Byrd’s private communications with Shane Smith; nor have the Debtors attempted to understand why Mr. Byrd’s son worked for Reagor-Dykes without the ownership group’s knowledge and how much was earned by this relationship.
"But the path forward has now changed. Because of Ford Credit’s attempt to obliterate Reagor-Dykes – perhaps in hopes that such an outcome will eliminate information relevant to the concerns noted above – Reagor-Dykes has no choice but to change course, and the Plan proposed by Reagor-Dykes will reflect this change. Importantly, this changed path – at Ford Credit’s insistence – should have no impact on Reagor-Dykes’ ability to confirm a Chapter 11 plan of reorganization. Like the rights of all parties, Ford Credit’s rights will be protected, but Ford Credit will be placed into the position of a disputed claimant until its rights and Reagor-Dykes’ claims are reconciled.
"The Plan proposed by Reagor-Dykes is confirmable, and the notion of a third-party non-consensual release is not a factor. Ford Credit will get what it wants, which is a litigated result. Ford Credit’s creation of this litigated result, which will likely be the product of expensive, high-stakes, and public litigation, should not interfere with the combined goals of Reagor-Dykes, International Bank of Commerce, and the McDougal-Dykes-Ewing Group to bring this business back to a place where it is productive and meaningful to the place and people of West Texas.
"For these reasons, this Court should deny Ford Credit’s attempt to leave this case as a burned-out engine of a charred truck. Ford Credit’s claims against the Debtors are disputed, pending further investigation of the alleged fraud and Ford Credit’s involvement therein. They should not be the basis to grant relief requested by Ford Credit. The property in which Ford Credit asserts a lien is necessary for an effective reorganization, and the Plan proposed by Reagor-Dykes properly treats and adequately protects all of Ford Credit’s alleged claims and liens against Reagor-Dykes and the collateral that secures such claims should this Court ultimately allow them. "
In the documents, RDAG concludes, “The Debtors’ business is viable and worth reorganizing. The Plan provides a global resolution that will prove to be in the best interest of all stakeholders. It should be undisputed that the Debtors operate car dealerships by selling cars; thus, having access to inventory to liquidate is necessary to an effective reorganization under the proposed Plan or any other plan of reorganization. It is essential that the automatic stay remain in place and Ford Credit be prohibited from forcing a premature “turnover and surrender” of vehicles in which Ford Credit alleges a disputed first-priority security interest. Lifting the automatic stay at this critical juncture is antithetical to all of the Debtors’ efforts as well as the contributions of creditors and investors toward effectuating the Plan and yielding a positive outcome in this case for all stakeholders. No single creditor should be allowed to disrupt the orderly process to be implemented by the Debtors for the benefit of all creditors and parties in interest. No matter the motivation behind Ford Credit’s attempt to go nuclear despite any real urgency, the reality is that allowing the Chapter 11 process to proceed and offer the second chance it was designed to provide will produce an outcome that will be far more beneficial for Ford Credit and all other creditors than the outcome produced by Ford Credit’s requested relief. Granting relief from the stay at this time would destabilize the proposed Plan and upend the Debtors’ plans for and efforts toward a regulated, equitable process supervised by this Court in favor of haphazard and piecemeal proceedings that ultimately benefit no one.”