A court-appointed receiver, charged with assessing the stability and potential operational ability of Long Island, N.Y.-based Condor Capital, said Condor could not restart its auto loan origination business, according to a court document filed June 2.
Condor’s origination operations have been shut down since a federal judge issued a temporary restraining order on April 23. The TRO was the result of an investigation and subsequent complaint charging Condor with bilking thousands its customers out of $11 million.
Although Condor is licensed to operate in 30 states, two states — Massachusetts and Connecticut — have said they intend to revoke Condor’s sales finance license there.
The findings by receiver Denis O’Connor of AlixPartners LLP are particularly significant since Condor will now have no access to cash.
On May 13, when the judge overseeing the case appointed the receiver, she wrote that the receiver should understand that getting the company back into operating mode was more important to the court than taking the time to understand “every nuance” of Condor’s financial picture.
But in the court filing dated June 2, O’Connor wrote that based on his observations, he could confirm the accuracy of many of the weaknesses in governance, compliance and internal controls cited in court pleadings by the New York State Department of Financial Services.
He also wrote that in order to start up lending money again, Condor would need to “rehabilitate” itself.
Sometime around April 29, Condor’s owner, Stephen Barron terminated the company’s sales and credit staff, 43 employees in total.
But in order to start originating loans, Condor would also need the capital to make the loans. Condor’s origination capital came from its credit facility from Wells Fargo & Co., and cash generated by the business.
O’Connor wrote that Wells Fargo representatives and their attorneys asserted to him that “they want their loan repaid and do not want any new originations to take place.” As of May 2014, Condor owed Wells Fargo $256 million on a portfolio valued at $350 million.
Wells Fargo said it does not intend to provide Condor with any additional funding, according to the document.
Condor could not make its April payment on its credit facility, so an event of default was declared by Wells Fargo. That caused the interest rates on the credit facility to go up from 2.75% to 5.25%.
