Reagor Dykes on Monday requested an extension of its so-called exclusivity period in its ongoing bankruptcy case.
During first 120 days of a bankruptcy case, the debtor (which in this case is Reagor Dykes) has the exclusive right to file a reorganization plan. The creditors cannot file their own plan during the exclusivity period.
The bankruptcy court can extend the time “for good cause” and Reagor Dykes requested 90 more days.
“Specifically, [Reagor Dykes’] representatives have been or will continue to be focused on resolving all taxes, title, and license and trade-in issues, identifying potential purchasers, qualifying ‘overbidders,’ negotiating terms of asset purchase or buy-sell agreements, and attempting to save as many jobs as possible in the process,” the request said.
In November, Reagor Dykes dealerships will go up for auction with KamKad Automotive Group having the initial bid of $25 million. Others have the chance to overbid. Thirteen dealership locations would be sold free-and-clear except for property taxes and any other mutually-agreed liabilities.
It’s not clear in the request how Reagor Dykes could reorganize under Chapter 11 bankruptcy laws after the auction. Ford Motor Credit Company alone claimed that Reagor Dykes defaulted on more than $40 million of debt.
Is There an Exit Strategy?
“[Reagor Dykes] and their professionals have not yet formulated a plan of reorganization and are still weighing their options regarding the filing of a plan or other course of action once their business operations have been successfully transferred to new operators,” the request said.
“As such, [Reagor Dykes companies] seek an extension of the Exclusive Periods to continue working through these issues,” the request said.
“This requested extension will allow the Debtors time to continue focusing their efforts on selling their assets and transitioning operations prior to formulating a chapter 11 plan…,” the request said.
However, that Chapter 11 plan might well be the end of Reagor Dykes.
The request said, “[Reagor Dykes companies] have consistently maintained that their overarching purpose is to sell their operations…”
In simple terms, the motion is intended to allow the sale of the dealerships first and to then come up with an exit strategy. If creditors like Ford or local banks filed competing plans, it could interfere with the sale of the dealerships.
Reagor Dykes filed for bankruptcy on August 1. If granted, the exclusivity period would be extended from November 29, 2018 to February 27, 2019.
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