UPDATED: 9/29/08 5:15 pm EDTA lawyer for Bill Heard Enterprises Inc. told a bankruptcy judge on Monday that the former largest Chevrolet dealer in the world was “out of money.”
Bill Heard Enterprises and GMAC have reached an agreement to provide funding for the winding down and liquidation of the dealership company, the two sides said. Bill Heard Enterprises said it had a similar agreement in principle with its other two floorplan finance companies, but not in writing.
The statements came at an expedited bankruptcy court hearing in Decatur, Ala., that aims to liquidate Bill Heard Enterprises within 45 days.
Lawyers for GMAC Financial Services and a second company that provided floorplan financing to Bill Heard stores raised concerns about the dealership company paying its lawyers ahead of its creditors. One floorplan company’s lawyer said that the last 70 vehicles that it had financed for Bill Heard Enterprises were apparently sold with “no payments going to the lender.”
“There may be a question later about proper use of cash collateral,” said Jim Rollins, an attorney for Alphera Financial Services, a division of BMW Financial Services.
Charles Tatelbaum, an attorney representing GMAC, raised concerns about Bill Heard Enterprises paying its law firm, Burr and Foreman, of Birmingham, Ala. He said the Columbus, Ga., dealership company paid its lawyers $109,000 Sunday, Sept. 28, and $144,000 Friday, Sept. 26. During that same period, he said, electronic payments to GMAC had bounced.
“That represents our cash collateral,” Tatelbaum said.
Robert Rubin, a Burr and Foreman lawyer representing Bill Heard Enterprises, said “Based on our analysis, they wound up with no money, no cash. They are out of money.”
U.S. Bankruptcy Judge Jack Caddell today approved a plan for GMAC to provide $5.4 million to cover expenses related to Bill Heard Enterprises’ liquidation. He is expected to review plans for similar funding from the other floorplan creditors on Wednesday, Oct. 1.
In addition, GMAC said it is willing to give Bill Heard Enterprises a $1.58 million advance to pay medical expenses for 2,700 employees who had their insurance through the dealership company. To get the money, though, Bill Heard Enterprises will have to agree to sell eight of its 13 stores by Oct. 14, and have the judge’s approval for those sales.
The liquidation plan includes $815,000 for senior managers who are assisting in the wind-down, and for security to guard the dealerships’ remaining vehicles. The judge asked the attorneys whether any of that money was going for golden parachutes.
Rubin, Bill Heard Enterprises’ lawyer, said no. In fact, he said, there were three Heards on the payroll, and all three have been terminated: Bill Heard Jr., William T. Heard III, and Edward Heard.
Bill Heard Enterprises filed for Chapter 11 bankruptcy protection Sunday. The company closed its stores Wednesday, Sept. 24.
In a filing in U.S. Bankruptcy Court in Decatur, the company owned by William T. Heard Jr. said its dealerships began seeing significant monthly losses in mid-2007. Dealerships were losing between $2 million and $5 million each month in 2008, it said.
The filing listed Bill Heard Enterprises’ assets and debts at between $500 million and $1 billion each, with a floorplanning debt of $229 million.
Also Sunday, 16 Bill Heard affiliates filed for court protection. Affiliate Bill Heard Chevrolet Co. cited assets and debts of between $50 million and $100 million.
The filing blamed the company's downfall on a “perfect storm” that included fuel price increases and the Chevrolet product mix of trucks and SUVs. It also said 10 Heard stores had used floorplan loans from GMAC, which GMAC pulled Aug. 21.
Three stores had floorplanning from BMW Financial Services, and the Scottsdale, Ariz., store used floorplan funding from JPMorgan Chase Bank. The flagship store funded its International truck inventory through Navistar Financial Corp.
Bill Heard Enterprises ranked No. 13 on the Automotive News list of the top 125 U.S. dealership groups, with 40,781 new vehicles sold in 2007. It posted 2007 group revenue of $2.13 billion.
James B. Treece contributed to this report