LUBBOCK, Texas (KCBD) - A second reorganization plan has been submitted to a federal bankruptcy court that would allow a Reagor-Dykes Auto Group plan sponsor $13 million for re-organizational operating costs. This has yet to be approved by the court.
The plan, submitted on Tuesday, Sept. 3, provides a re-organizational structure that would potentially get the auto group out of bankruptcy. However, if this is not approved all the group’s assets will be liquidated.
All 13 RDAG locations — 12 in West Texas and one in Dallas — would be given $13 million in cash from a plan sponsor. However, this would function as a new, reorganized entity.
This will reorganize dealerships, business and its operations; the reorganized entity will also retain its operating assets. The plan also allows franchise agreements with Ford Motor, General Motors Mitsubishi and Toyota to be re-assumed.
There is no set plan sponsor, according to court documents. Once a plan sponsor is finalized, it will own 90 percent of the reorganized entity’s equity.
That $13 million would also be categorized as new equity, meaning it would be seen as an investment from the sponsor, and could only be used as in-possession financing or equity financing, according to court documents.
About $4.3 million can be used as working capital on an as-needed basis, up to $4.5 million for expenses related to the estate, $700,000 to qualified lenders, up to $2 million to Ford Credit if certain conditions are satisfied and up to $1.5 million to GM Financial if certain conditions are satisfied.
The proposed plan would also allow RDAG to pay back claims that were made by both Ford and GM Financial.
Ford’s unsecured claims will be paid by excess cash flow after administrative expenses are paid off. Those payments include a $1 million cash payment in 2020, another $1 million cash payment in 2021 and a $5 million unsecured promissory note.
GM’s claims will also be paid by excess cash flow and would satisfy any unsecured claims. Those payments include $750,000 180 days after the plan is approved and another $175,000 payment after the initial payment. In total, that would add up to $1.5 million to GM.
There are also disputed claims by First Capital Bank that would not be paid out in this plan but paid at a later date in full with 10 percent equity securities by the reorganized entity.
In mid-June four entities were eyed as potential plan sponsors but those were never named. With all four, Rick Dykes, a co-owner of the RDAG, would be required to serve as an investor. No plan included Bart Reagor.
Those who put the plan together have prepared three-year projections of income and expenses, according to court documents.
If this is approved by the courts, the new reorganized entity would have 75 days to execute or otherwise be liquidated.