wake up buy here pay here people it's a beautiful day go grab yourself another cup of joe and say hello to jim and michelle rhodes on the buy here pay here morning show take it away you two hey everybody good morning good morning happy wednesday coming to you from oklahoma finally got relocated from utah to oklahoma and uh If you could see the other side of the room, there's still stuff scattered about. We're still in rearrange furniture mode and placing furniture and all that good stuff. But we are safely in Oklahoma and starting to return in the truck today. I was having a chat with Martin Gutierrez. Many of our listeners would know Martin and they also moved recently. And so he was he and I were commiserating about. And there is a commiseration. Yeah, for sure. Yeah, it was a. You know, it was a slow move. We've had enough experience with this, and we know better than to move too fast. Dang it all. Last time we did this, we said never again. But, you know, it still happens. Yeah, it worked out okay. You know, you pay a price for all the stuff. But here we are. Any announcements from you before we dive in? We're coming up to the dealer forum, which is... I think it starts on Sunday. I think the date was the ninth, so I have to look at the calendar. We have a lot of colleagues that are going to be attending, but we will be busy unpacking. It seems, yeah. So we'll miss this one again, but I hope that's a lot of success for NIADA and those dealers who attend. I'm sure that if you haven't yet booked, it's not a long drive for many of you. I'd say get yourself out there and be part of those roundtable conversations. All righty. So let's dive in to what we wanted to talk about today. And it seems like there's a lot of topics and we always will go into a search mode. And what are the things that are are talk worthy in that? And And we've talked about a few of them that came up again. And this is one that has been coming up more. It kind of follows in line with some of the big closures. And a lot of it is around money and all of that. And we know from those of you who are plugged in that capital is... probably one of the biggest things most dealers deal with outside of their business. I mean, business that they're a customer of is capital. Yeah. And obviously for many, capital is the gas in the tank. And today we're going to talk more about the Primal Land bankruptcy. We've touched on that in the past. We did a little more research going into this conversation. And obviously with us being on the go, we haven't been able to you know give as much time to this particular topic yeah but it's it's significant we've been having conversations of course as always with dealers and so I think when i think about the conversations i've had and how it affects them and how it may or may not affect them and of course separating fact from fiction as you go through some of this stuff or you know there's obviously always going to be some public relations aspects to things like this and so i thought we what we do today is to kind of dig in we put chat gpt on the trail of finding out what information is out there publicly of course there are Bruce D Potter, Press releases from primal in themselves, there are articles on I saw some before I think on Bloomberg today picked up reuters and you know some of those articles referencing primal and some of them tie. tie that to the kind of as the latest news following the Tricolor event. And so I think this is an important topic for dealers to know about. And especially when ChatGPT broke it down for us in terms of the relevance for dealers, this is what made us feel like we needed to bring the topic to the thing. And so we can dig in. Let me just first back up and say that You can visit Primalin's website. You can read the press release from them. You can find a certain amount of information online yourself if you want to get out there and learn what's there. Um, in the records that are, um, you know, kind of publicly available regarding the bankruptcy petition and the actual filings, it says that, um, Primalin went to, uh, into bankruptcy court, uh, representing having less than five hundred million in, in assets and probably liabilities as well, if I recall. But the, um, the numbers that I've received from others who have re actually reviewed the, the petition and the, and the documents from the filings, The numbers that I heard, Michelle, were that they reported two hundred million in assets and about one eighty five in liabilities. OK, so that's kind of the number. And let me just by the way, I'm going to stop right now and just share this. Oh, the streamer's already gone. So let's just make sure we understand. Michelle and I are not attorneys. Nothing about today's podcast is meant to offer anybody legal advice as much as it is to share with folks where to go do your own research. and to be able to start to identify the key factors. You know, I've had conversations with dealers who are primal and borrowers, and so they've obviously received notice. They're aware, obviously it's all across the news in our buy here, pay your environment. And so those folks are more directly affected there. We can talk about that part. And we can also talk about those dealers who are going to be indirectly affected. because they're going to be shopping for funding and that is going to be a factor. And what's happened with Primal and it's going to be a factor in terms of where one can go currently to find, you know, replacement financing and asset backed lines of credit. Yeah. And it kind of makes me wonder too. I don't know if you all out there have been watching some of the things that are happening in the news, economy wise with banks, that there's been some, roadblocks, hiccups, some big things that have been happening recently with banks. I follow on social a congressman from North Carolina and talked about an emergency meeting that they had about saving depositors in two banks that closed in the last few weeks. And with the, with the intent to stop the domino effect, because what they were finding when the, there was a bank in, in San Francisco, Silicon Valley area, that was mostly for startups. And then another one that closed in New York in the last couple of weeks. And so, you know, it's, there's, We, we are, money is a big deal to, to all buy here, pay here dealers. And so, um, we don't, you know, I don't know if any of this has anything to do with, uh, with Primal Land, but it's in this one vein of capital banks. Um, because we, we do know, and we'll kind of dive into this a little bit, uh, that, that Primal Land are not their own financial backers. So you know that that that has a play in this as well. And there's some things we wanted to talk about around that also. You know, we'll be touching on, are you sure you know who you are getting money from? Right. Yeah, that's a factor here. And I think maybe we'll just stick to the script here in terms of, let me just kind of read for folks what ChatGPT gathered and how it characterized the circumstances around a bankruptcy filing with somebody like Primalin. So let me just read what it says. Primalent says dealer loans aren't being called due. I mean, again, you can read the press release yourself online. But bankruptcy filings and creditor pushback show complexities. Some creditors say key units weren't included. Now, this is getting into stuff that would be legal information online. That's creditors, obviously, in a bankruptcy court. Creditors of Primalent. Right. And so this says to dealers, don't take no impact. face value read the fine print yeah so I think it goes on to say we'll read the rest here but you know what it begins to say is you're gonna want to check your own document yeah you're gonna want to even potentially do some correspondence to have them confirm who the actual lender is because I think you know we recognize it in situations like this Primalin would have been feeling some pressure, right? The reason to file bankruptcy is because they're receiving some pressure. And we were talking with dealers that were experiencing some pressure flow through. So it's just part of the times. Yeah. So again, reading from ChatGPT here, it says, quote, Primalin says business as usual, but bankruptcy math is a lawyer's playground. I love that. Bankruptcy math. is a lawyer's playground okay so dealers should treat business as usual like a warm campfire safe if you watch it dangerous if you ignore the sparks okay so this is where we would say and listen let me just pause and say that was in quote by the way um let me just pause and say that we you know jim and michelle have no reason to wish primarily anything yeah the people that we know from there like them yeah and obviously there have been a critical funding component lots of dealers and so that becomes an essential part of the industry and so it's a it's a major it's a major ripple, right? This is a shockwave that can be felt by lots of people. And I think right now we're talking about first to those dealers who are directly affected, like they could be borrowers, right? And then there are dealers who are going to be shopping for capital, you know, that may be, you know, may be affected in that next wave. But what, you know, what ChatGPT is saying is, Let's make sure that we look past the business-as-usual commentary. We understand in circumstances like these that PR being what it is, that we would obviously, if we were in that situation ourselves, we would try to put a positive face on it. Part of that, too, is you don't want people to panic. If they're trying to restructure, they're trying to mitigate panic. that yeah panicking so actionable advice for dealers it says you know near term pull your funding loan agreements with primal and or any funder flag any acceleration clauses carve outs cross default language that's something I'm familiar with that I think you want to define that what's cross there's also sometimes called cross collateral clauses and I know you know obviously when when a dealer let me just quit talking about a Primalin scenario for a moment and just talk about when a dealer goes to get funding anywhere with a lender of that nature, it's really not fair to call Primalin a lender. They're a subprime capital provider with a special program. They're more like a specialty lender, specialty finance solution. But what basically would happen is in that agreement, it would be common for the provider of the capital to take a security interest in Other assets, like it's common to have a UCC filing. So you can look up uniform commercial code, UCC filings. It's common for them to place a blanket sort of security interest in other assets of the borrower. And that would be in the documents. Right. Yeah. And so I think you want to look at that and make sure about any cross collateralization or cross what it called here cross default language. make sure about the specific legal entity named in the document so go back to your document to make sure you know who is the entity who is the the the lender you're also going to want to know who which entity is the borrower right but again cross default language when you've got dealers who have dealership with inventory you've got finance companies with contracts and there's obviously some you might have real estate for many some real estate in the picture and other business assets so so it really becomes a question of you know where does that leave us and and so i think we we're just obviously our interest here in the podcast has always been yeah we speak to dealers like we you know white hat way in particular is is in the business of trying to make a a better experience for dealers and their consumers. And so that's what today is about. This is about just making sure that dealers have what they need to protect themselves and navigate this situation skillfully. And we have every hope and expectation that it will work out well for the dealers involved and for Primeline. So this is just in general. And if you have any funding coming from some primal end bank, whatever it is that these are, these are pieces that we would suggest that you, uh, just take a good look at because again, it's not just primal end. There are a lot of financial institutions that are constrict or contract contracting. Yeah. Thank you. Um, okay. So let me, let me go on to, um, you know, chat GPD suggests check counterparty footprint, uh, and entity level risk matters in such a case. So why? Debtors sometimes exclude problem subsidiaries or move assets around during reorganization. Again, lawyer's playground, right? Creditors have already flagged concern about excluded units in Primalin's case. That can leave dealer borrowers exposed if the contract references an excluded entity. So there's an article from Bloomberg dated October, that's headlined, Primal Lends Unpaid Lenders Blast Bankruptcy for Missing, and then it goes, I don't have the full headline here. It cuts it off, but it's kind of truncated. Let me see. For Missing Key Unit. Okay, so that's part of what we would recommend you find that article to understand kind of what we're referring to here, but What it says is, yeah, we got to fly in the vicinity again. So let's see. I don't want to reread this part, but this can leave dealer borrowers exposed if the contract references an excluded entity. I think I said already. So name your lender like you name a horse know which one you're writing this is chat gpt yeah so i love the western side of that yeah name your lender like you name a horse you know which one you're writing yeah so chat gpt um is uh is familiar with our western thing yeah so it's kind of so what are the action what's the actual advice it says ask your lender for a written confirmation identifying the exact legal entity that holds your loan and whether that entity is included in any bankruptcy or sale if you get legalese bring it to council or a trusted cpa end quote so this is basically i'm surprised to see it ask you know to suggest getting cpa involved but but certainly um if you get legal you have to ask amanda about that yeah yeah yeah so basically it's just basically saying verify you know who the parties are right is really which is just always a good idea anyway especially when you're dealing with millions of dollars um to know who who is it that is ultimately the lender Yeah, and now this is just again general advice from ChatGPT. Liquidity stress test your business. So do a stress test on your liquidity and your customers. Why? When funders are in distress, they tighten underwriting and liquidity dries up. That's doubly bad for dealers who rely on purchased capital lines or warehouse facilities. again that's just general um sort of feedback but it's um obviously we know primaline is saying business as usual and every indication that we've seen heard from other dealers and so far it is business as usual so this is just something that we um yeah and again this is just yeah in general and to keep yourself um aware of all of the things that are happening because it's just you know you you you just want to protect yeah yeah so it says if your cash runway looks like a canoe and low tide okay so think about what that's really suggesting if your cash runway looks like a canoe and low tide a lender's bankruptcy is the rock you don't want to hit so you don't want to be in that place where you know there could be interruptions i would i guess is what you'd say because you're already kind of in in uh in dangerous territory so actionable item Yeah, it says, run a sixty-day cash and receivable stress test. What happens if you lose your next funding draw? Prioritize collections, delay non-critical purchases, and identify one backup lender or broker. You know, we're familiar with some. Folks can reach out to us. I'll be doing some text introductions today for dealers that we know inside our V-AID community. And so this is something that, you know, is very much part of our world, too. It definitely comes in And we're always working to try to support those dealers that are in our community. And so the next one is communicate to customers with integrity. Don't weaponize fear. Customers panic when they hear bankruptcy and may miss payments or worse. Clear, honest messages that focus on continuity of service prevent unnecessary churn. Primalin claims loans aren't being accelerated. That's a message dealers should echo cautiously to their customers. Now, you know, I don't know that I'm necessarily advising at this point that dealers reach out and... Let their customer base know. Yeah, that has to necessarily affect them at this stage. But I do think they want to be prepared to respond in the event that it comes... Yeah, and the quote that it came up was, tell customers the truth without the drama. Panic makes people worse players. Worse payers. Payers. Panic or truth, transparency, that is a cornerstone to White Hat Way and making sure... You have to tell everything. If it doesn't affect your customers at this point, you don't need to be letting them know. But make sure that what you say is truthful. Try not to if you need to reach out to your customers. Use language that will not panic them. If you need some help on that, please feel free to reach out. We can help with that. But it's, yeah, just stay truthful and try not to panic your customers if you need to let them know. Yeah, it feels unlikely. I don't think you need to. Yeah, it seems unlikely at this point that the customers would have any concern. They don't know which dealers are Primal and Dollar. And this next one is a good one. Yeah, it says use this as the wake up. Tighten underwriting and documentation now. Lenders in trouble mean more scrutiny from regulators and potential buyers. Clean underwriting, documented payment histories, and repeatable processes increases your value and protects your customers. So let me ask you something. I've not been in the industry and seen something like this happen. If it's a Chapter XI, that means they're restructuring, they're trying to sell. So if they're trying to sell, does that mean that someone that wants to buy is going to do a forensic audit even of dealers? I can't say. I don't know. I'm not going to profess to know anything on that subject. And I'm not an attorney, not a bankruptcy expert. Obviously, as a former dealer, I have more experience on the consumer bankruptcy side. So business bankruptcy will be a little bit different. But I would just say that what this is really suggesting to all dealers is, understand and I would say for sure that you want to tighten up your processes. We talk about this with dealers all the time is increasing your enterprise value and in this case your borrowing capacity because you're have fewer lenders available. If you're shopping for a line of credit this year, early next year, you're going to have a fewer number of parties that are willing to extend lines of credit. they're going to be able to cherry pick and so that means they're going to be doing business primarily with the lenders or with the borrowers and dealers who are in the healthiest position so what would their definition of the healthiest position be i can only speak if i were you know a lender in their position i'd be looking for you know it mentions um portfolio history, that's where I come from anyway. I'd be looking at history of cash flows and portfolio performance. I'd be looking at liquidity and debt ratios. I'd be looking at cleanliness of the financials, the actual balance sheet and profit loss reports, cash flow statements. I'd certainly wanna see the cash flow histories. I'd be looking at the dealers themselves, financially speaking. Their their net worth and their personal financial statements. So these are things that you know We want to make sure the dealers who are going to be in the best position to capitalize and grow and there's a lot of chatter about that in Social media and across the industry and I'm sure it'll be a conversation, you know in Nashville this coming week is like the dealers that are Most likely to still be around. I said on a prior podcast, look ahead to twenty twenty seven. What is the landscape and buy here, pay here look like, you know, a couple of years from now? And I can imagine. I can say from my perspective in the industry that it feels to me like you're going to have tighter capital, which means the dealers who are in a position to access capital and grow and secure most of the business or certainly gain market share are going to be those dealers that are the healthiest. They're in the best position to weather storms. This is the wake-up call to say, let's get our affairs in order. Let's make sure our financials are good, our records are caught up, our portfolios are tight. This is a good opportunity for us to do exactly that. This is a good time of the year to do that. It's usually a bit slower for a lot of dealers. It's the time to get prepped for next year. You know, if it's something you've been putting off, now's the time. It's a good time to do that. For sure. Yeah, and I think we can close with just kind of summarize the last one. Look for operational opportunities. So that for me is about efficiencies. We're always looking for that anyway. So let's take the opportunity to tighten up without gouging. It's not saying expand pricing in the interest of gouging the consumer as much as it's suggesting pricing. let's make sure that we're operationally efficient let's trim costs where we can let's make sure we're as healthy in that regard as we possibly can and so i think that's uh prudent advice for absolutely any time but especially this time but you know there's there's tons more in chat gpt obviously any of us can go through and you know source that sort of information but Again, just in summary, we're not attorneys, we're not offering legal advice as much as we're offering operational perspective and just trying to remind folks that We, again, have no reason to wish Primal Lend and other lenders like Primal Lend anything but success. Dealers need this capital. Primal Lend's been an important player in this segment for, I think the press release said they've been around for eighteen years. And so they're an important player. I just think it's important for us as dealers out there to recognize that the ripple effect from the tricolor thing and now the Primal Lend's bankruptcy filing is that expect that the the money's going to get tighter it's going to be more difficult to access We need to make sure that we're in good shape. And if you are a dealer with Primaland, you know, we've offered some tips, according to ChatGPT, how to make sure that you kind of know where you stand. Yeah, absolutely. And, you know, if there's any of these pieces with getting your financials in order or any of it, please feel free to reach out. Yeah, please. And we'd be happy to help. Call or text, Um, nine Oh three eight one six zero two one six. So thanks for tuning in today, folks. We'll, uh, we'll keep you posted. We've got, uh, uh, Friday coming up. We'll dig back into data. It's my hope that we'll have enough data to start to, um, give some tips on how last year, you know, I was watching Annamarie Beck, uh, uh, digital online, digital attention online. Thank you. um asks about every month how was your month and it looks like the majority of people had a better month this month than last year this time same time so yeah we'll check that and see what it looks like all right well um thank you so much for joining we really appreciate you making this part of your day um let us know again if there's anything that we can do to help and i hope you guys have a great uh wednesday and we'll see you again on friday friday
