What Will It Take To Get You Into The Heart Of This Alleged Ponzi Scheme Today?

According to federal prosecutors, the SEC and the New York Attorney General, among others, cashflow has long been a problem for car-dealership-owning private-equity firm GPB Capital. Those private jets and lavish birthday parties—to say nothing of those dividends owed to investors—didn’t pay themselves, and so allegedly new members of the GPB family did.

Alas, this neat trick doesn’t work so well after the whistle has blown, your chief compliance officer has entered a guilty plea and three top executives have been arrested. That means GPB’s gonna have to find the money to keep operating somewhere else, and if you’re in the market for some Northeastern car dealerships but are feeling some sticker shock, does GPB (well, its court-appointed receiver, anyway) have a deal for you.

The New York firm is trying to sell what remains of the Massachusetts-based Prime Automotive Group, which largely consists of dealerships in New England. GPB acquired a majority interest in Prime in 2017, when the group included more than 20 stores, for more than $235 million. The firm made a separate deal for related real estate, a legal filing states…. GPB Automotive, the holding company for the firm’s dealerships, said in an Aug. 16 regulatory filing that it may sell more dealerships to provide operational liquidity. Such sales may be priced below fair value and go on the books as losses, it has said in filings. In some cases, auto manufacturers have forced dealership sales by threatening to terminate supplies.

“They’re running out of money,” said Joseph Sarachek, a lawyer in Scarsdale, N.Y., who represents some GPB investors. He said his clients are “very disappointed” with the pace of government action regarding the firm…. [GPB] sold 14 last year, booking losses on most deals despite reporting net proceeds of about $49.5 million…. Industry leaders say it is a seller’s market for auto dealerships, as values have surged since 2019.

GPB Capital Seeks to Sell Prime Automotive, Sources Say [WSJ]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.