Tricolor Auto Acceptance filed for bankruptcy today following reports that the subprime auto lender had closed locations and was preparing to lay off employees.
The Irving, Texas-based subprime auto lender filed for Chapter 7 bankruptcy with the U.S. Bankruptcy Court for the Northern District of Texas, according to court documents. The filing states that Tricolor will have funds available to distribute to unsecured creditors, with the number of creditors between 25,001 and 50,000.
The 26,688 creditors listed in the filing include vendors alongside former and active employees. Tricolor listed about 1,284 active employees in the filing.
The financier’s estimated assets totaled between $1 billion and $10 billion, and estimated liabilities ranged from $1 billion to $10 billion, according to the filing.
Debtors include Tricolor Holdings and affiliates such as Tricolor Auto Acceptance, Tricolor Insurance Agency, Tricolor Home Loans, Tricolor Real Estate Services, Tricolor Funding and Tricolor California Auto Group. Also listed is lender Apoyo Financial.
Each entity filed a petition for Chapter 11 bankruptcy protection with the court, according to the filing. A Chapter 11 bankruptcy allows businesses to reorganize and maintain operations while they pay creditors.
Tricolor subsidiary Ganas Investors owns all Tricolor Holdings’ common equity interests, and Tricolor Holdings owns the outstanding equity interests of remaining debtors, according to the filing.
Banks JPMorgan Chase & Co., Fifth Third Bancorp and Barclays Plc stand to lose hundreds of millions of dollars tied to losses from Tricolor loans, according to Bloomberg reports.
Tricolor relies on funding from warehouse lines of credit from banks alongside term securitizations and equity capital and established a credit facility with Fifth Third in September 2022.
Tricolor has not responded to Auto Finance News’ requests for comment.
Employees furloughed
The filing comes days after reports spread that Tricolor’s retail locations closed and employees were furloughed. A letter dated Sept. 5 alerting Tricolor employees to a 30-day furlough amid “significant and immediate financial challenges” circulated across personal LinkedIn and X accounts.
Then, company leadership told several employees that Sept. 9 was their last day, sources told AFN that day. The website for Tricolor Holdings was down around late afternoon. Calls to Tricolor’s main number went to voicemail and its customer support chat services were functionally inactive.
AFN reported Sept. 9 that Tricolor was likely to file for bankruptcy protection.
Tricolor’s loan portfolio totaled $1.4 billion as of March 31, up 20.1% year over year, according to S&P Global. No financial challenges were indicated in Tricolor’s latest asset-backed securitization deal, a $217 million subprime transaction on June 10.
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