More Trouble for Reagor-Dykes in Second Bankruptcy Hearing
Thursday, the Reagor-Dykes Auto Group (RDAG) and their legal team is back in court for their second bankruptcy hearing since Reagor-Dykes first filed for Chapter 11 Bankruptcy on August 1, 2018. Ford Motor Credit is suing Reagor-Dykes for over $41 million dollars in what it has referred to as “. . . one of the largest floor-plan-financing frauds in the history of the United States.”
Since Reagor-Dykes filed for Chapter 11, multiple companies have been affected. On Wednesday, Universal Service Underwriters Corporation (USUC) filed court documents that show Reagor-Dykes owes them approximately $664,720. The USUC is a business that has sold vehicle service contracts and limited warranty products to Reagor-Dykes, and now they want their money. If Reagor-Dykes is unable to pay them, USUC has asked the court that they be allowed to cancel their legally binding contracts with Reagor-Dykes.
The International Bank of Commerce is another entity seeking payment from Reagor-Dykes. According to court documents, the IBC recently issued a $35 million dollar credit facility to two Reagor-Dykes companies, listed in court documents as D and R Acquisitions, L.L.C. and RD7 Investments L.L.C., which they claim have not filed for bankruptcy and own most of the property that RDAG uses to run its auto dealerships. In other words, IBC has loaned $35 million dollars’ worth of credit to Reagor-Dykes, and that credit line has been used to purchase real estate.
Court documents show that Reagor-Dykes owes IBC two months’ worth of loan repayments but cannot bay IBC due to the terms of an Interim Cash Collateral Order issued by the court earlier in August of 2018. According to the order, Reagor-Dykes is authorized to use cash to pay employees and other expenses but not rent. The IBC hopes to have the Interim Cash Collateral Order amended to include rent payments as to avoid foreclosure of the property purchased by Reagor-Dykes.
Related Story: Liberty Capital Bank Files Objection Against Reagor Dykes
Ford Motor Credit (FMC) has also filed a new objection in the Reagor-Dykes bankruptcy case, criticizing Rick Dykes and Bart Reagor for using a $500,000 personal retainer to pay for the legal services of the Mullin Hoard & Brown law firm. In a court document, FMC suggests that the $500,000 retainer was not disclosed at the first hearing of the Reagor-Dykes bankruptcy case and questions whether or not Mullin Hoard & Brown should be compensated by such a method. FMC claims that personal payments to the law firm on behalf of Rick Dykes and Bart Reagor creates a conflict of interest in the bankruptcy case since the law firm has represented the RDAG companies and not Dykes and Reagor themselves.
The FMC objection comes as Reagor-Dykes has filed a motion in court to have Mullin Hoard & Brown replaced with other legal counsel that the Chief Restructuring Officer has personally requested. This is just one of many issues sure to be discussed in Thursday's (Aug 30) second bankruptcy hearing.