The rise of Rahim Hassanally, a prominent young dealer in California, may end with a bitter ending, after seven of his dealers have abruptly blinded after months of financial distress.
The only Momentum Auto Group store that remains open after the closures in November, sources say, is Momentum Chevrolet, which is largely owned by General Motors.
The dealer group, with stores in Fairfield, San Jose and Vallejo in the San Francisco Bay area, was 124th on the Automotive News list. Top 150 Dealership Groups in the United States last year, with 7,753 new vehicles and 4,749 retail sales in the retail trade in 2017.
The dealer group's spiral – fueled by financial problems caused by Californian forest fires, slow permits for an upgrade of a facility, among other things – is a blow to Hassanally, a rising star in the world of automotive retail. Hassanally was Recommended in Automotive News & # 40; 40 Under 40 listing in 2013 and is on the board of the American International Automobile Dealers Association.
Momentum's management team is already evaluating bidders for the group, said Christian Scali, managing partner at Scali Rasmussen law firm in Los Angeles, speaking on behalf of Momentum's management team. Court documents indicate that the car group entered into an agreement with the Dave Cantin Group to sell its dealers.
The dealer group was hit hard by the many challenges over the past year, such as California forest fires, the bankruptcy of one of its major lenders and delays in completing a facility upgrade at its Toyota dealer, the largest store in the group, told Scali Automotive News.
Momentum Auto Group accused the temporary closure in a news release issued after that interview, especially for revenue losses arising from the Campfire in Butte County, California, The release showed that poor air quality affected the work that could be done by the staff and could also block the shoppers. Momentum plans to switch to a new owner, although it did not give details about when it would happen or with whom.
The group has also become entangled in various lawsuits in recent weeks. BBVA Compass and BMO Harris Bank have sued this month for breach of contract in the Solano County Superior Court. BBVA Compass also prosecuted an alleged violation of a map agreement.
The store closures stem from a statement of November 14 in the BBVA Compass case that forbids some dealers from selling vehicles.
A lawyer representing BBVA Compass and a spokesperson for BMO Harris Bank declined to comment.
Closed for an indefinite period of time
An employee of a dealer who asked not to be mentioned said that the Chevy store remains open, given the ownership of the car manufacturer. A Momentum employee said that employees would expect an update of the company's status on Friday, November 30th.
The following Momentum dealerships are closed for an indefinite period:
- Momentum Chrysler-Dodge-Jeep-Ram from FairfieldMomentum Chrysler-Dodge-Jeep-Ram from VallejoMomentum Nissan in Fairfield Momentum Toyota in FairfieldMomentum Kia in VallejoMomentum Mitsubishi and Momentum Hyundai, listed on the same address FairfieldInfiniti from Fairfield and Volkswagen from Fairfield, listed on the same address address
Fiat Chrysler Automobiles, Nissan North America, Mitsubishi Motors, Hyundai Motor America, Kia Motors America and Toyota confirmed the store closures for their brands.
Financing agreement
Momentum Auto Group reached agreement with its lender 1st Global Capital Financial Services on July 19, according to deBanked, a publication that specializes in non-bank financing and a story from Jalopnik, that published the letter.
The letter said that 1st Global agreed to provide $ 3 million in additional funding to Momentum and that it would release Rahim Hassanally from all known and unknown claims or actions it might have taken against him. "
The deal was subject to Hassanally's agreement to sell Momentum and accept any offer of more than $ 75 million in Blue Sky value.
Judicial documents show that 1st Global Capital Momentum lent about $ 40 million in a cash advance, a kind of financing that is used when companies can not get traditional bank loans or financing.
In July, 1st Global Capital applied for the reorganization of Chapter 11 of the bankruptcy in the southern district of Florida. A month later, 1st Global and its CEO and founder, Carl Ruderman, were beaten with a fraud case by the Securities & Exchange Commission. The SEC claims that the short-term lender to small and medium-sized companies fraudulently raised more than $ 287 million from more than 3,400 investors from 2014 to July 2018.
Court documents in the SEC case indicate that Momentum was faced with financial distress at the beginning of this year. In April, the 1st Global Capital had asked for more cash and had taken on two investment banks, one to advise on recapitalization of debts and another on the sale of the company.
David Muller contributed to this report.