According to federal prosecutors, the SEC and the New York attorney general, among others, cash flow has long been a problem for dealership-owned private equity firm GPB Capital. Those private jets and lavish birthday parties – not to mention the dividends owed to investors – didn’t pay off, and so did supposedly new members of the GPB family.
Unfortunately, this neat trick doesn’t work so well after the whistle blows, your chief compliance officer files an admission of guilt, and three top managers have been arrested. That means GPB has to find the money to keep working elsewhere, and if you’re in the market for some northeastern car dealerships but are feeling some sticker shock, GPB (well, its court-appointed recipient, anyway) has one to handle for you.
The New York company is trying to sell the remnants of the Massachusetts-based Prime Automotive Group, which consists mostly of dealerships in New England. GPB acquired a controlling stake in Prime in 2017, when the group comprised more than 20 stores, for more than $ 235 million. The company has closed a separate deal for related real estate, according to a legal petition…. GPB Automotive, the holding company for the company’s car dealerships, said in a regulatory filing dated Aug. 16 that it may sell more car dealerships to provide operational liquidity. Such sales can be below fair value and posted as losses, the records state. In some cases, automakers have forced dealer sales by threatening to stop deliveries.
“They’re running out of money,” said Joseph Sarachek, a Scarsdale, NY lawyer who represents some GPB investors. He said his customers were “very disappointed” with the pace of government action on the company. [GPB] sold 14 last year, posting losses on most deals, despite reported net proceeds of approximately $ 49.5 million. Industry leaders say it is a car dealership seller’s market as values have risen since 2019.
According to sources, GPB Capital is aiming to sell Prime Automotive [WSJ]
Sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker, to learn about the latest developments in litigation, regulation, business and financial services.