IN THE UNITED STATES BANKRUPTCY COURT FOR THE MIDDLE DISTRICT OF TENNESSEE NASHVILLE DIVISION In re:
AUTO MASTERS, LLC; AMC FINANCE, LLC; AMERICA'S UNITED FINANCIAL, LLC; CAPITAL PARTNERS, LLC; AUTO MASTERS OF CLARKSVILLE, LLC; DIRECT AUTO FINANCE, LLC; AUTO MASTERS OF FRANKLIN, LLC; AUTO MASTERS OF HERMITAGE, LLC; AUTO MASTERS OF MADISON, LLC; AUTO MASTERS OF NASHVILLE, LLC; ONE SOURCE FINANCIAL, LLC; AUTO MASTER SALES & SERVICE, INC.; SOUTHEAST FINANCIAL, LLC; AUTO MASTERS OF SMYRNA, LLC; and AUTO MASTERS OF WEST NASHVILLE, LLC, Debtors.
) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )
Chapter 11 Case Numbers 3:17-bk-07036 3:17-bk-07038 3:17-bk-07041 3:17-bk-07042 3:17-bk-07045 3:17-bk-07046 3:17-bk-07047 3:17-bk-07048 3:17-bk-07049 3:17-bk-07050 3:17-bk-07051 3:17-bk-07052 3:17-bk-07053 3:17-bk-07054 3:17-bk-07055
EXPEDITED MOTION FOR ENTRY OF INTERIM AND FINAL ORDERS (I) AUTHORIZING THE DEBTORS TO (A) OBTAIN SECURED FLOORPLAN FINANCING, (B) USE CASH COLLATERAL, (II) GRANTING ADEQUATE PROTECTION, AND (III) SCHEDULING A FINAL HEARING Certain of the above-captioned debtors (as identified in Section 9.3 below, the “Debtors”) respectfully request the Court to authorize the Debtors to continue obtaining credit in the ordinary course of business, on terms identical to those that existed prior to the petition date, to finance the purchase of retail inventory. In support of this Motion, the Debtors respectfully represent as follows: SUMMARY OF RELIEF REQUESTED 1.
Expedited Relief Requested. The Debtors request the Court to authorize certain
of the Debtors to obtain debtor-in-possession financing by way of financing agreements (the
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“DIP Facilities”) consistent with the terms set forth in Exhibit A. The contents of the DIP Facilities are set forth below pursuant to Federal Rule of Bankruptcy Procedure 4001(c). As used in this motion, the term “Debtors” refers to the individual debtors that obtain credit and are named as borrows in the DIP Facility. 2.
Basis for Urgency. The Debtors need to obtain financing in order to purchase
inventory in the ordinary course of business. The Debtors’ business model has historically relied upon floorplan financing to purchase inventory (i.e., vehicles) on credit. This allows the Debtors an ability to maximize inventory, and thereby maximize revenue, while utilizing the square footage of the real estate upon which the Debtors operate. Without the relief requested herein, the Debtors would not be able to purchase vehicles at the same rate. Sales would diminish and the Debtors would be in jeopardy of not satisfying their operating obligations. The requested DIP Facility is a necessary component to the Debtors’ business model during the initial stages of these bankruptcy cases. 3.
Notice. This motion has been served on: (i) all parties consenting to electronic
service via the Court’s CM/ECF system; (ii) the Office of the United States Trustee via email; (iii) the 20 largest creditors and all secured creditors via email, fax, or U.S. mail, (iv) the Debtors’ secured creditors, and (v) the Floorplan Lenders (defined below). Prior to filing the petition, counsel for the Debtors informed the Office for the United States Trustee that first day motions would be filed in this case. 4.
Suggested Hearing Date. The Debtors request an interim hearing date on or
before October 20, 2017, along with other first day motions filed contemporaneously herewith. 5.
Supporting Argument. The Debtors support this motion as set forth below.
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JURISDICTION AND VENUE 1.
The Court has jurisdiction to consider this matter pursuant to 28 U.S.C. §§ 157
and 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b). Venue for this matter is proper in this district pursuant to 28 U.S.C. §§ 1408 and 1409. 2.
The bases for the relief requested herein are Sections 105(a) and 364 of Title 11
of the United States Code, Rules 2002, 4001(b), 6003, and 6004 of the Federal Rules of Bankruptcy Procedure, and Local Rules 2081-1. This motion does not request obtaining of credit or the incurring of debt pursuant to 11 U.S.C. § 364(d)(1). BACKGROUND 3.
On October 17, 2017, each of the Debtors filed a voluntary petition for relief
under chapter 11 of title 11 of the United States Code. 4.
The Debtors are continuing in possession of their properties and are managing
their businesses, as debtors in possession, pursuant to 11 U.S.C. §§ 1107(a) and 1108. 5.
No official committee of unsecured creditors has been appointed in these cases. RELIEF REQUESTED
6.
The Debtors seek entry of an interim order (the “Interim Order”), substantially
in the form of the proposed order attached hereto as Exhibit B, and thereafter a final order (the “Final Order”), authorizing the Debtors to (i) obtain post-petition floorplan financing and Nextgear Capital, Inc., Grandsouth Bank d/b/a Carbucks, and Automotive Finance Corporation (the “Floorplan Lenders”), pursuant to debtor-in-possession financing agreements (the “DIP Facilities”) attached hereto as Exhibit A; (ii) authorizing the Debtors to perform such other and further acts as may be required in connection with the DIP Facilities; and (iii) grant to the Floorplan Lenders security interests in the Debtors’ collateral in the same right, priority, and
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manner as determined by the DIP Facilities and applicable law. Notwithstanding the foregoing, the Debtors expressly request the Floorplan Lenders to obtain first position, purchase money security interests in all inventory purchased on credit extended by the Floorplan Lenders. With respect to any assets not purchased pursuant to the DIP Facilities, the Debtors consent to provide the Floorplan Lenders a non-priming lien, the priority of which is determined by applicable law. 7.
This motion does not attempt to impair, improve, or otherwise affect any pre-
petition security interest in favor of the Floorplan Lenders. All such rights, to include rights related to perfection and priority, shall be determined by applicable law. FEDERAL RULE OF BANKRUPTCY 4001(c) DISCLOSURES 8.
The following consists of a summary of the DIP Facilities’ terms and conditions: Automotive Finance Corporation DIP Facility a.
Interest Rate – Prime + 2%;
b.
Term – 60 Days, or 48 hours from disposition, subject to extensions;
c.
Borrowing Limits: i.
Auto Masters Sales and Service, Auto Masters, LLC, and Auto Masters of Nashville - $3,500,000
ii.
Auto Masters of Nashville - $900,000
iii.
Auto Masters of Franklin - $1,250,000
iv.
Auto Masters of Clarksville - $600,000
v.
Auto Masters of Hermitage - $1,600,000
vi.
Auto Masters of Madison, Auto Masters of Smyrna and Auto Masters of West Nashville - $2,650,000.
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d.
Events of Default – See, e.g., Section 7 of p. 5 of Exhibit A;
e.
Liens – Purchase Money Inventory and Title thereto (See, e.g., Section 3,
p. 3 of Exhibit A. Borrowing Conditions – See, e.g. Sections 2.4 & 2.5 of p. 2 of Exhibit A.
f.
BACKGROUND AND BASIS FOR DIP FINANCING 9.
The Debtors operate independently owned and managed car dealerships.
Collectively, the nine Auto Masters operating locations represent the largest “buy here pay here” car dealerships in Middle Tennessee. Unlike many similarly branded retailers, the Debtors have grown their business based on a customer-oriented model. This model includes low down payments (as low as $850), flexibility for low-credit applicants, and no waiting on outside financing. Auto Masters prides itself on providing quality vehicles to individuals who would not otherwise be approved from larger, corporate branded dealerships. There are thousands of satisfied customers who, as a result of the Debtors, are able to enjoy the freedom of transportation and the ability to get to and from work in a convenient and affordable manner. 10.
The Debtors have contemporaneously herewith filed a Company Profile that
provides additional details about the Auto Masters business operations and financial position. 11.
In order to be competitive in the automotive retail industry, the Debtors are
required to maintain a broad and diverse inventory. This naturally requires the Debtors to be highly capitalized, or otherwise to be reliant upon short-term credit facilities, to purchase the required inventory. Although the Debtors have been in a position to self-fund the purchase of inventory, it has consistently maintained credit pursuant to floorplan financing arrangements to ensure the proper inventory levels. Without the availability of credit, the Debtors would miss out
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on sales and revenue. These sales are even more important given the Chapter 11 filings and the associated transaction costs that accompany a filing. The DIP Facility will ensure that (i) the Debtors will continue operating their business as usual, (ii) the cash flow projections will be accurate, and (iii) the business model will remain viable and sustainable. 12.
The terms of the DIP Facilities are standard within the industry. The Debtors are
familiar with floorplan lending rates and assert that it would not be able to obtain more favorable rates through third parties other than the Floorplan Lenders. The Debtors further assert that entering into the DIP Facilities is in the best interests of the Debtors, their respective bankruptcy estates, the creditors, and all parties in interest. WHEREFORE, the Debtors respectfully request that the Court enter an order similar in content to the order attached hereto as Exhibit B, authorizing the Debtors to obtain post-petition financing on the terms contained in the DIP Facilities attached hereto as Exhibit A, granting the Floorplan Lenders all rights contained in the DIP Facilities, and granting the relief requested herein and such other relief as the Court deems appropriate under the circumstances. Respectfully Submitted,
/s/ Griffin S. Dunham Griffin S. Dunham Henry E. (“Ned�) Hildebrand, IV R. Alex Payne DUNHAM HILDEBRAND, PLLC 1704 Charlotte Avenue, Suite 105 Nashville, Tennessee 37203 615.933.5850 griffin@dhnashville.com Counsel for the Debtors
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CERTIFICATE OF SERVICE This motion has been served on: (i) all parties consenting to electronic service via the Court’s CM/ECF system; (ii) the Office of the United States Trustee via email; (iii) the 20 largest creditors and all secured creditors via email, fax, or U.S. mail, (iv) the Debtors’ secured creditors, and (v) the Floorplan Lenders. /s/ Griffin S. Dunham Griffin S. Dunham
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EXHIBIT A
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Exhibit B
IN THE UNITED STATES BANKRUPTCY COURT FOR THE MIDDLE DISTRICT OF TENNESSEE NASHVILLE DIVISION In re:
AUTO MASTERS, LLC; AMC FINANCE, LLC; AMERICA'S UNITED FINANCIAL, LLC; CAPITAL PARTNERS, LLC; AUTO MASTERS OF CLARKSVILLE, LLC; DIRECT AUTO FINANCE, LLC; AUTO MASTERS OF FRANKLIN, LLC; AUTO MASTERS OF HERMITAGE, LLC; AUTO MASTERS OF MADISON, LLC; AUTO MASTERS OF NASHVILLE, LLC; ONE SOURCE FINANCIAL, LLC; AUTO MASTER SALES & SERVICE, INC.; SOUTHEAST FINANCIAL, LLC; AUTO MASTERS OF SMYRNA, LLC; and AUTO MASTERS OF WEST NASHVILLE, LLC, Debtors.
) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )
Chapter 11 Case Numbers 3:17-bk-07036 3:17-bk-07038 3:17-bk-07041 3:17-bk-07042 3:17-bk-07045 3:17-bk-07046 3:17-bk-07047 3:17-bk-07048 3:17-bk-07049 3:17-bk-07050 3:17-bk-07051 3:17-bk-07052 3:17-bk-07053 3:17-bk-07054 3:17-bk-07055
INTERIM ORDER GRANTING DEBTOR’S EXPEDITED MOTION FOR DEBTOR-IN-POSSESSION FINANCING PURSUANT TO 11 U.S.C. § 364 This matter came before the Court on Debtors’ expedited motion for debtor-in-possession financing (the “Motion”) seeking an order authorizing the Debtors to obtain financing with Nextgear Capital, Inc., Grandsouth Bank d/b/a Carbucks, and Automotive Finance Corporation (the “Floorplan Lenders”) on an interim and final basis in the form of floorplan credit facilities (the “DIP Facilities”), the terms of which were described in the Motion and are more fully set forth in Exhibit A to the Motion. Based upon the Court's review of the Motion and all matters brought to the Court's attention at the interim hearing pursuant to Bankruptcy Rule 4001(b)(2) and (c)(2) (the "Interim Hearing"), after due deliberation and consideration, and no objections having been filed, the relief requested in the Motion is granted and it is hereby ORDERED as follows:
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1.
Grant of Motion; Authorization of Interim Financing.
The Motion is hereby
GRANTED, and the Court hereby authorizes and approves Debtors’ request for authority to obtain post-petition funding by way of the DIP Facilities up to the maximum existing DIP Facility amount of $10,500,000.00. 2. October
Final Hearing. The Final Hearing shall be held at , 2017, in Courtroom
,
Customs
House,
Tennessee. Objections shall be filed on or before October 3.
a.m./p.m., 701
Broadway,
on
Nashville,
, 2017.
Need for Financing. An immediate and ongoing need exists for Debtors to obtain
financing to continue Debtors’ operation as debtors-in-possession under Chapter 11 of the Bankruptcy Code and to minimize disruption of Debtors’ business. 4.
Grant of and Priority of Post-Petition Liens and Security Interests. All advances
made by the Floorplan Lenders, plus all interest, fees, and expenses (including reasonable legal fees incurred by Floorplan Lenders) and all other post-petition obligations of the Debtors to the Floorplan Lenders, shall be secured by valid and perfected first priority lien and security interest in and to all assets (the “PMSI Assets”) purchased by funds and/or credit extended pursuant to the DIP Facilities. In addition, the Floorplan Lenders shall be secured by valid and perfected liens and security interests in all of the Debtors non-PMSI Assets, the priority of which shall be determined by applicable law. Such liens shall be valid and perfected without the necessity of the filing of any UCC financing statement or establishing any segregated bank accounts or entering into any control agreements with any depository institution, and which liens and security interests shall at all times be senior to the rights of Debtor. 5.
Repayment. All post-petition obligations shall be due and payable, and shall be paid,
to the Floorplan Lenders as and when provided in the DIP Facilities.
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6.
Automatic Perfection of Liens. All liens and security interests granted to the Floorplan
Lenders herein to secure the post-petition obligations shall be deemed valid, binding, enforceable and perfected upon entry of this Order. The Floorplan Lenders shall not be required to establish a restricted or blocked account or enter into, with the Debtor, any control agreement, and further shall not be required to file any UCC-1 financing statements, mortgages, deeds of trust, security deeds, notices of lien or any similar document or take any other action (including possession of any of the Collateral) in order to validate the perfection of the liens. 7.
Service of Motion. Debtors have certified that copies of the Motion and notice of the
Interim Hearing have been served by electronic mail, telecopy transmission, hand delivery, overnight courier or first class United States mail upon the United States Trustee (the "U.S. Trustee"), counsel for the DIP Lender, and the 20 largest creditors of the Debtor. Other than the DIP Lender, Debtor asserts that no other creditor(s) claim a superior interest in the property in which Debtor proposes to grant a post-petition lien to the DIP Lender. The Court finds that notice of the Motion, as it relates to this Order, is sufficient for all purposes under the Bankruptcy Code and the Bankruptcy Rules. 8.
Section 364(e) Finding. The Court finds that any extension of credit hereunder by the
Floorplan Lenders shall be deemed an extension in good faith. THIS ORDER WAS SIGNED AND ENTERED ELECTRONICALLY AS INDICATED AT THE TOP OF THE FIRST PAGE.
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APPROVED FOR ENTRY BY: /s/ Griffin S. Dunham Griffin S. Dunham Ned Hildebrand R. Alex Payne DUNHAM HILDEBRAND, PLLC 1704 Charlotte Avenue, Suite 105 Nashville, TN 37203 615.933.5850 griffin@dhnashville.com Counsel for the Debtor
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