Hours after Bill Heard Enterprises Inc. filed for Chapter 11 protection in an Alabama court last week, the company signed an agreement with GMAC Financial Services to sell eight of its 14 stores by Oct. 14.
GMAC isn't buying the dealerships, but it is a creditor. It is joining another floorplan lender, Alphera Financial Services, a division of BMW Financial Services, in loaning Heard a combined $6.7 million to pay for Heard's liquidation.
An agreement with a third floorplan lender, JPMorgan Chase Bank, is expected any day.
The lenders have a keen interest in seeing the dealerships sell quickly. According to court documents, Heard Enterprises owes its floorplan lenders a combined $229 million. The faster the dealerships reopen and sell some vehicles, the better chance the lenders have to recoup those debts.
But it's unclear who will buy those stores. Robert Rubin, an attorney for Bill Heard Enterprises, told Judge Jack Caddell of U.S. Bankruptcy Court in Decatur, Ala., last week that he had received a "substantial number" of phone calls from dealers all over the country expressing interest in buying the dealerships.
8: Number of stores that must be sold by Oct. 14
$229 million: Heard Enterprisesí debt to floorplan lenders
8,000 to 10,000: Number of creditors
300,000+: Number of customers who may come forward with claims
45: Number of business days allotted for liquidation of Heard Enterprises
Bidding war?At least three buyers reportedly tried to acquire Heard's flagship store in Columbus, Ga. Megadealer Rick Hendrick has confirmed that he is pursuing a Heard purchase. Potential buyers also are interested in Heard's dealership in Scottsdale, Ariz., said General Motors spokeswoman Susan Garontakos.
Mark Rikess, a consultant in Burbank, Calif., said last week that he has two clients who have signed letters of understanding to buy two Heard dealerships. He declined to identify the clients or the dealerships but said all 14 dealerships more than likely will be snapped up.
"They're almost all in good locations," Rikess said. "Chevrolet is not going to disappear as a brand. Even if GM disappeared, Chevrolet has a lot of equity."
In charge of selling the stores is Fred Caruso, a consultant who helped liquidate the assets of WorldCom Inc. founder Bernard Ebbers after the latter was convicted of fraud in 2005.
Caruso is vice president of Development Specialists Inc., a Chicago corporate finance and turnaround consulting firm.
According to documents filed last week in the case, Heard Enterprises hired Caruso on Aug. 25, four days after GMAC froze its floorplanning from Heard, to help with the financial restructuring of the company and its subsidiaries.
A couple of weeks after the freeze, Alphera also suspended its floorplanning for the three Heard stores it funded, a former Heard manager told Automotive News.
Rubin, Heard's attorney, said it was Caruso who "discovered the distress" that led to the closing of the Scottsdale dealership on Sept. 12 and Heard's 13 remaining stores on Sept. 24.
10,000 creditorsBut the sale of the dealerships won't solve all of Heard's problems. Besides the three floorplan lenders, Heard Enterprises has from 8,000 to 10,000 creditors, attorneys say. And more creditors may be identified.
The bankruptcy case, which Judge Caddell described last week as "huge," could balloon even larger if some of Heard's 300,000 customers over the past five years step forward with "chargeback" claims.
An example: A customer purchases an extended warranty through the dealership but trades in the vehicle before the warranty expires. That customer may be entitled to a refund for the unused premium.
Said Caruso in his court affidavit: "It is impossible at this time to know who may be entitled to a 'chargeback' or even who may be eligible for a 'chargeback.' "
Chrissie Thompson contributed to this report