Below is our initial take on recent bankruptcy-related developments:
The auto dealer moved to liquidate its business on Wednesday, one day after Fifth Third Bank announced that it had discovered alleged fraudulent activity.
S&K Take: It isn’t every day that you see a chapter 7 featuring between $1 billion and $10 billion in liabilities. Tricolor Holdings LLC, a Texas-based subprime auto lender and 17 of its subsidiaries filed for chapter 7 liquidation in the Northern District of Texas. Tricolor is based in the Southwest (with 35 locations) and touts that it has disbursed $5 billion in auto loans, primarily to the Hispanic community. The filing, which occurred on September 10, was preceded by an 8-K filed by Fifth Third Bancorp. That 8-K indicated that Fifth Third had discovered “alleged external fraudulent activity” at a commercial borrower (which is presumably Tricolor). Fifth Third stated that it would take a $170 million to $200 million impairment on a $200 million loan (not great!). Additionally, the Financial Times is reporting that the DOJ is investigating loan irregularities at Tricolor. Needless to say, the fraud and the chapter 7 point to some interesting circumstances behind the scenes. If and when those details are disclosed, I imagine we will be revisiting this situation.
The Illinois-based “eatertainment” company, which filed for Chapter 11 this week, was delisted from the NYSE in March and will now seek a buyer at auction.
S&K Take: Pinstripes filed this week. For those of you unfamiliar with Pinstripes (*raises hand*), it is venue that pairs “scratch Italian-American cuisine with bowling, bocce and private events.” Who doesn’t like bocce? At its peak, the company (which was public) operated 18 geographically diverse locations (with California, Florida, Kansas, Minnesota, New Jersey and Texas among the lucky states to host a location) and had more sites under construction. That number dwindled to 8 locations as of the petition. The debtors point to inflation and decreased foot traffic as some of the culprits behind their troubles. The case fits within the typical paradigm — prepetition lender that purchased the debt is putting up a DIP and credit bidding the DIP and a portion of the prepetition debt for the assets in a stalking horse bid. This time the lender is Silverview, and bids are due in a month (October 13). If anything interesting crops up (pretty vanilla so far) we will report back.