The three winning bidders in a spirited auction in U.S. Bankruptcy Court on Wednesday didn't offer nearly enough to pay back the millions that disgraced auto mogul Joseph Prebul owes his creditors, but they didn't disappoint bankruptcy trustee Jerrold Farinash, either.
"If we had been selling (Mr. Prebul's 'blue sky' franchise rights) in a time when car sales were better, we would have gotten a better price," Mr. Farinash said at the end of four hours of negotiation. "But there are a lot of people who would have told you that blue sky has no value right now, and we just got $900,000 for it, so I think it went real well."
The bidding started shortly after 10 a.m. and, after a 90-minute lunch break ended around 2:15 p.m. with U.S. Bankruptcy Judge John Cook's approval of the proposed sales:
n Kia in Chattanooga was sold to Nelson Bowers for $300,000. Mr. Bowers, whose bid was uncontested, was a founding member of Sonic Automotive Inc., one of the largest automotive retailers in the United States. He owns Toyota and Honda stores in Cleveland, Tenn., as well as the Volkswagen and Audi dealerships in Chattanooga.
n Prebul Motors in Dalton, Ga., was sold to Johnny Pye for $100,000. Mr. Pye and his son, Sean, own an Acura dealership in Chattanooga as well as Pye Honda, Pye Nissan and Pye Motorsports in Dalton. They bested Edd Kirby Adventure Chevrolet of Dalton, whose original bid was $85,000.
n Volvo and Infiniti in Chattanooga were sold to Nelson Long for $500,000. Mr. Long, who already sells Mercedes-Benz, Hyundai, Pontiac and Buick brands in Chattanooga, had to fight off both Larry Hill - owner of Larry Hill Ford and Larry Hill Imports in Cleveland - and Prebul Infiniti manager Terry Kidd. Backed by a group of investors out of Knoxville, Mr. Kidd offered up to $275,000 for just the Infiniti dealership but was turned down because he did not make a package offer for both dealerships.
Close to 30 auto dealers, investors and attorneys turned out Wednesday morning to sit in on the bidding process, which Mr. Farinash conducted auction-style by recording bids on an easel at the front of the courtroom as potential buyers volunteered them.
The debate started out very orderly, broken up only by requests from attorneys to break for further negotiations. Men in suits slipped out into the hallway with Blackberrys pressed to their ears or joined huddles in various corners of the courtroom.
"It was kind of docile," according to Johnny Pye, who said that when he bought Scenic City Mazda in a bankruptcy auction in 1990, "there was a lot more going on."
"I expected a lot more people to be bidding," Mr. Pye said. "I guess with this economy, people are scared."
The economy certainly has lowered prices to bargain basement level, he added, noting that on Wednesday he won the rights to all six of Mr. Prebul's Dalton brands for a fraction of the $750,000 he paid for the Mazda dealership.
Buyers obviously are cautious about taking on Mr. Prebul's Chrysler Jeep Dodge store in Chattanooga, which has yet to attract a single bid, according to Mr. Farinash. The trustee said he hopes it will get attention as soon as Chrysler announces a corporate bailout plan.
He said he'll continue to operate the dealership until an April 9 hearing, when the issue can be addressed again.
Mr. Farinash attracted buyers on the other dealerships by hiring Mr. Prebul's former accountant, James "Donnie" Hutcherson, to market them. Mr. Hutcherson shopped the businesses to more than 20 people and arranged for a mass e-mail to auto association members in Tennessee and Georgia, according to Mr. Farinash.
Lawyers vetted those who showed interest before Wednesday's bidding, Mr. Farinash said, since the winning bidders must be OK'd by the car manufacturers before the deals are considered final.
"We could have people come in and bid millions of dollars, but that wouldn't do any good if they didn't get approved," Mr. Farinash said.
Getting the manufacturers' approval could take anywhere from a few weeks to a few months, he said. During that time, the manufacturers could stipulate the purchase of various merchandise - the vehicles themselves, for instance - to go along with the deal, but otherwise the recipients are buying only the franchise rights for each brand.
Judge Cook offered approval of Mr. Farinash's work throughout the bargaining process.
"The prices that you've obtained are very adequate prices for the assets that you have sold," the judge said. "It sounded to me like a very professional auction."
Mr. Farinash collected deposits on the purchases but won't ask for full payment until manufacturer approval is issued. He then will split the blue-sky sale proceeds with Regions Bank, one of Mr. Prebul's creditors.
But Mr. Prebul's bankruptcy proceedings are far from over. Typically, resolution of a case of this size might take two to three years, according to Mr. Farinash.
"We've got a lot of work ahead of us," he said.
In addition to his bankruptcy cases, Mr. Prebul - who did not appear in court Wednesday - is involved in a criminal case and a civil lawsuit in New York as well as a civil suit in Hamilton County Circuit Court.
His troubles began when he was arrested Feb. 10, charged with 11 counts of federal wire fraud. At that time, he already had closed his Chrysler Dodge Jeep dealership in Dayton, Tenn., and his Ford dealership in Ringgold, Ga., but was forced to declare his other businesses bankrupt after his arrest.