Buy-here, pay-here lender and floor planner Primalend filed for Chapter 11 Oct. 22 in the U.S. Bankruptcy Court for the Northern District of Texas in Fort Worth.
According to the court documents, the company owed approximately $286 million in debt and had approximately $233 million in outstanding loans to dealers.
The lender has pledged to continue business operations, continue servicing loans and honor existing lines of credit as it works to fulfill its debts through the courts.
“We want to be clear: there is no impact to our dealer-borrowers’ loans or terms. No debt is being called due or accelerated as a result of this process,” said Mark Jensen, CEO of PrimaLend. “We are pursuing a sale process to maximize the value of the business and strengthen our balance sheet in order to position PrimaLend for long-term success. We believe this is the best path forward to secure a strong financial future while maintaining our commitment to dealer-borrower success.”
Founded in 2007, Primalend, based in Dallas, primarily provides capital to BHPH dealers, with 90 percent of its loans being first-lien revolving lines of credit to dealers.
The court filing points to market conditions after COVID-19, impacting the company’s finances. It mentions the shortage of vehicles and inflation driving up prices for dealers and consumers. As wholesale and retail prices normalized and decreased, and stimulus funds were exhausted, many consumers fell behind on payments.
According to data from the Federal Reserve and Equifax curated by Lending Tree, 30-day delinquencies as a percentage of overall auto loan debt fell to a near 20-year low in mid-2021 at 5 percent. It hit 8.1 percent in 2024.
Used vehicle prices have fallen from $31,471 in August 2022 to $27,950, according to CarGurus.
The filing claims that as a result of the falling prices of vehicles and the rise of delinquencies, the assets’ values were diminished when repossessed, bringing additional losses to the dealer. The dealers, in turn, fell behind on payments to lenders due to decreased loan performance and cash liquidity.
Todd Yates, Director of Business Development at Primalend, said it was a “minority” amount of their larger customers in their portfolio of 85 to 100 dealer rooftops that were unable to meet their obligations that led to the company’s shortfall.
“The core of our business is healthy, and the vast majority of the balance sheet is stable,” Yates said.
The company will be working through the courts to come to a resolution on its debt, restructuring under new ownership, or settling the amount owed. Yates is optimistic that the company will emerge from Chapter 11 within six months to a year.
He said Primalend remains committed to servicing the BHPH industry. The company is also not looking to downsize from its current staff of 35 employees.
