Bad books, death threats and a bankruptcy: The stunning collapse of Reagor Dykes

Gary Byrd Jr. didn't like the numbers he saw for some of Reagor Dykes Auto Group's dealerships.

A June audit of vehicles floorplanned with seven of the dealership group's west Texas stores had found discrepancies. Now, another audit was finding the same out-of-trust problems.

On Saturday, July 28, Byrd, Ford Motor Credit Co.'s regional manager for the Dallas area, met with the group's founder and co-owner, Bart Reagor. It didn't go well.

Byrd told Reagor about the discrepancies, said Ford Credit was asking to be paid funds that were due and said auditors would return to the stores the next Tuesday to count vehicles again.

"Bart Reagor became enraged, screamed at me, 'No, you are not,' and threatened to 'shoot my f------ ass,' " a threat he repeated in a later text, Byrd said.

Ford Credit sent in a corporate security team from Dearborn, Mich. — and its lawyers. On July 31, Ford Credit sued Reagor Dykes, citing financial irregularities and asking for immediate repayment of all debts and the return of all vehicles and other assets in which the lender held an interest. The above account of the Byrd-Reagor meeting came from an affidavit filed with that lawsuit.

On Aug. 1, several Reagor Dykes dealerships and related companies filed for Chapter 11 bankruptcy protection.

It was a stunning implosion. The dealership group had repeatedly made Inc. magazine's list of the 1,000 fastest-growing companies in the U.S. This year, Reagor Dykes Ford Plainview and Spike Dykes Ford Lamesa won the Ford President's Award, given for exemplary customer sales and service.

Whether the group is reorganized and continues in business, is liquidated or sold may be determined at a bankruptcy hearing on Aug. 16, to be followed by a creditors meeting on Sept. 6.

Ford Credit's suit is on hold for now because of the Chapter 11 filing, though it told the court on Aug. 6 it intends to pursue its claims against the parts of the group that were not part of the bankruptcy filing. It's unclear whether that would include going after Dykes and Reagor personally.

Liquidation is unlikely because it's in the interest of the lender and the automaker that the dealerships continue selling cars, said attorney Stephen Dietrich, of Denver, a partner in charge of the auto practice at Holland & Knight.

Although he has no direct knowledge of the Reagor Dykes case, "I would be shocked if suddenly you saw those dealerships disappear," he said. "If they were really poor operators, poor performing stores, or in an overdealered market, Ford might be interested in shutting them down, but that's unlikely."

Much will depend, Dietrich said, on "if the dealer can explain, 'Here's why this happened and why it won't happen again.' " If it's a "longtime good dealer and they made some mistakes, maybe they'll be able" to go forward, he said. But if not, the bankruptcy "trustee is going to want to sell an operating, viable business" to a dealer who can obtain floorplan financing.

Responding to Ford Credit's charges won't be easy.

Ford Credit's audits found 147 of the 150 vehicles sold by the dealerships were sold, on average, 55 days before the date upon which the dealerships paid them off, vs. the seven processing days allowed by the contract.

The audit also identified 15 cases in which the dealerships sold a vehicle and then, after it was sold, floorplanned that vehicle with Ford Credit even though it was no longer in inventory, the suit says.

For now, the dealerships are open.

On Aug. 3, the group issued a statement to local media that read in part: "Reagor-Dykes Auto Group was very pleased that it was able to reach an interim agreement with Ford Motor Credit to allow us to pay our employees and their associated benefits this afternoon. There is no question that the past seven days have been difficult for the Reagor-Dykes Auto Group family, but we are determined to continue to work with Ford Motor Credit in selling our current inventory and providing the best possible service to our customers. Doors at all of our dealerships will open Monday for business."

Despite that statement, staff layoffs crimped the dealerships' ability to operate fully. Local TV station KCBD reported on Tuesday, Aug. 7, that despite the group's claim that all stores would be open Aug. 6, at least two locations were not, while another store was open for sales but not service.

In a statement, Reagor Dykes said, "In compliance with the order of the Bankruptcy Judge issued Friday, the dealerships have placed on leave certain personnel to comply with the budget and avoid exceeding the allowed expenditures agreed upon by Ford Motor Credit."

Besides setting budget limits, the court order requires the dealerships to pay Ford Credit within one business day for any vehicles sold, and bars the stores from offering any service loaners or doing dealer trades or sales at auctions of more than two vehicles without Ford Credit's consent.

Alexa St. John contributed to this report.