A Chapter 11 bankruptcy filing by Manchester, Inc. raises questions over the financial stability of the buy-here/pay-here side of the new and used-vehicle business.
Manchester, which owns 11 such car lots, said its debt at the time of filing amounted to $124 million.
Among hundreds of creditors listed in the filing, 27 are franchised new-car dealers that sold Manchester lot vehicles and parts.
Manchester CEO Richard D. Gaines organized the firm in 2001 as a mining and mineral exploration business. In 2006, the mission changed to buy-here/pay-here operations and the company received a loan of $75 million and $300 million in cash to fund acquisitions from a private-equity investor, the Palm Beach Multi Strategy Fund.
Manchester also issued stock traded over the counter. A total of 4 million shares were sold to the Palm Beach firm for $3 a share.
The stock went from $1.97 a share in 2004 to $8.59 in 2006. The price tanked as Manchester losses mounted, reaching 38 cents this year on the eve of the Chapter 11 filing.
Fifteen of the creditor dealers are in Indiana. Others are in Georgia, Tennessee and Texas.