The Collectibles by James J. Kaufman Read Free Book Online Page B

briefcase, and pulled out a particular file. He then locked eyes with Preston, and said, “I want to review with you the condition of being Sold Out of Trust . . . ”
    â€œWe know what it means when we haven’t paid the bank what we owe on the vehicles, Andrew,” Casey interrupted.
    â€œI’m sure you do, Casey, but our litigation department received a memo from our malpractice insurance underwriter directing that we must inform you as to the meaning and implications of SOT. Please bear with me.” Andrew looked first at Casey and then at Preston. Preston nodded and Casey stared blankly at Andrew.
    â€œI know you don’t want to go through this and I’ll make it as brief as I can,” Andrew said. He then proceeded to explain to Preston and Casey, in mind-numbing detail, the nature and character of SOT, legally and practically, with all of its implications, including potential criminal exposure.
    â€œAgain, Andrew, we know what SOT is. The real problem is what can we do about it? Aside from all the technicalities, when do we get to the real world?” Casey asked. “Given the 2008 crash, the aftermath and all the other problems in our business, how many dealers do you think can really keep up with timely payments to the bank? That money is needed for operating expenses and cash flow. Our dealers are getting killed, sales are way down and the customers are hurting and upset. What are we supposed to do?”
    Preston shifted in his chair, obviously uncomfortable, as Casey, seeing that Andrew was not offering anything, continued.
    â€œHell, everyone’s scared. Never been this bad. If the dealer needs cash, he’ll keep all the money from the sale – and use it in the business or whatever – figuring he’ll pay the bank off later.”
    â€œI know you’re upset, Casey,” Andrew replied. “I’ve already told you I had no choice but to be able to say that I explained all this to you. We think that the amount could be in excess of eight million. The inventory has relatively small value when compared to the debt from the cap loans and the floor plans, and the value is dropping further because of the deteriorating market conditions. Plus the manufacturers want to get rid of many of their non-performing dealers. The wheels are off the car business and we see no light at the end of the tunnel. I’m sorry.”
    Feeling the sweat running down his sides and the middle of his back, Preston jumped up, hurried to the credenza, and poured a large glass of ice water. “We can always sell one or more of the stores, can’t we?” Preston asked. “Ford, at least, is still buying stores back.”
    â€œFord’s not easy. No blue sky. Valuation in the basement. As far as selling to dealers, the timing’s bad. The buyers will work you over, discount the assets, and work with the franchisor on permission for the transfers – and that’s if they don’t cancel the franchises, like Chrysler and GM are doing now. When they finally conclude their due diligence, you’ll be six to twelve months out.
    â€œI’ve already mentioned the expected Temporary Restraining Order in California. They’ll seek an order compelling all of the proceeds be directed to the bank. We’ll try to prevent the TRO, or at least have it modified so that ordinary business expenses would be first taken out by the dealership before money goes to the bank. Loans to officers, however, would likely not be permitted, nor would drawing out funds to help any of the other stores. There would be no profit generation.”
    At this point, Preston was pacing the room. “What about the value of the underlying real estate in those stores?” he demanded, throwing his pen on the table.
    â€œI know you’re aware that real estate’s down across the board, some places worse than others. And I’m sure you know what’s going on