Bankruptcy Looms: CarBiz Defaults on Credit Lines

CarBiz Inc., the Bradenton, Fla.-based provider of training, collections and other services to independent auto dealers throughout North America and operator of 25 lease here-pay here CarBiz Auto Credit Centers, defaulted on two lines of credit totaling nearly $29 million, according to a Jan. 22 Security and Exchange Commission Form 8-K filing.

The company owns and operates a chain of buy here-pay-here used automobile dealerships. Catering primarily to buyers with poor credit histories, such dealerships finance vehicles with their own money. CarBiz’s group of auto finance credit centers includes more than 25 locations in eight states. The company in 2009 acquired about $10 million in consumer loans from Star Financial Services, a California-based indirect lender.

The firm’s chairman and CEO is Carl Ritter; president, secretary and director, Ross R. “Rick” Lye; and COO Paul R. Whitley. Created as an independent dealer DMS services provider in the late 1990s, CarBiz grew to include consulting services to the buy here-pay here industry. In 2004 the firm launched CarBiz Auto Credit Centers, and currently operates 25 centers throughout the U.S., making CarBiz Auto Credit one of the nation’s largest chains of buy here-pay here automobile dealerships, according to CarBiz.

Indiana-based floorplanner Dealer Services Corp. declared CarBiz in default Jan. 18 of more than $16.4 million. Wells Fargo Preferred Capital, Inc. CarBiz’ other senior lender, also declared a default of nearly $12.2 million on Jan. 21.

“Without further funding from DSC and/or Wells Fargo,” CarBiz stated in its SEC filing, “and without the ability to use the payments on the leases and loans that secure the indebtedness to DSC and Wells, which are pledged as collateral to DSC and Wells Fargo, along with all of the company’s other assets, the company will have no ability to make payroll or pay its other debts, and will likely be forced to file for bankruptcy in the very near future.” In much-publicized event at the May 2009 National Alliance for Buy Here-Pay Here Dealers conference in Las Vegas, CarBiz introduced what it called “a revolutionary new lease here-pay here program that brings new opportunities and new capital to BHPH dealers.” Ken Shilson, NABD’s chairman, endorsed the program. Shilson did not respond to an interview request.

CarBiz, in partnership with DSC, said at the time it made more than $100 million in new capital available to buy here-pay here dealers with a program that would “improve cash flow and customer retention” and offer a variety of other benefits to dealers. We have been unable to find any dealers that received capital under this program. Additionally, no response was made to two requests for an interview with CarBiz senior management regarding these defaults and impending bankruptcy. There was no indication in the 8-K filing as to the status of the dealerships, the capital program for buy here-pay here and CarBiz’ other services for dealers.