PrimaLend Capital Partners, LP - Case Summary

Business Description

Founded in Dallas in 2007, PrimaLend Capital Partners, LP and its Debtor and non-Debtor affiliates (collectively, "PrimaLend" or the "Company") operate as one of the largest national asset-based lenders financing “Buy Here Pay Here” (BHPH) car dealerships and third-party investors in Retail Installment Sales Contracts, or RISCs (collectively, “Dealer-Borrowers”).

• The BHPH dealership model involves the dealer directly financing vehicle purchases for consumers, typically those with poor or no credit who are often excluded from prime auto credit markets.
• PrimaLend serves a critical role in this ecosystem by providing liquidity to profitable dealers that cannot self-fund and may not qualify for traditional bank financing. The Company has assisted multiple borrowers in “graduating” to traditional bank financing, thereby lowering their cost of capital.

The Company originates first-lien revolving lines of credit (RLOCs), sub-debt loans, inventory floorplan loans, and real estate-backed loans across twelve states, with approximately two-thirds of its Dealer-Borrowers based in Texas. The market for financing BHPH dealers is sizable, with an estimated $20 billion in annual receivables originations, but features high barriers to entry due to its complexity and significant regulatory requirements.

As of the Petition Date, the Company holds approximately $280 million in loans from its Dealer-Borrowers.

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Corporate History

The Company was founded in 2007, then doing business as PrimaLend Capital Group, Inc., and obtained its first credit facility for $2.5 million, which grew to $6 million by the end of that year. In 2010, the Company formed its primary lending entity, PrimaLend Capital Partners, LP (“PCP”).

• To meet the evolving needs of its Dealer-Borrowers, the Company strategically expanded its offerings over the following decade.
• In 2019, it launched a floor plan lending business unit, Good Floor Loans, LLC (“GFL”).
• Between 2020 and 2023, amid a period of significant year-over-year growth, the Company added its third business unit, PrimaLend Real Estate LLC (“PRE”), which provides real estate-backed loans to allow dealers to unlock equity in their properties.

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Operations Overview

PrimaLend’s operations are centered around its three primary business units—PCP, GFL, and PRE—which collectively offer a comprehensive suite of liquidity options for Dealer-Borrowers. The Company differentiates itself through its market reputation, deep industry expertise, and an advanced, proprietary technology platform that integrates in real time with dealers’ management systems to monitor inventory, sales, and collections, enabling faster funding decisions and enhanced risk visibility.

Organizational Structure

• PCAP Holdings, LP (“PCAP”): The holding company that owns the equity interests in PCP, GFL, and PRE. PCAP is the primary borrower on the Company’s Senior Unsecured Notes and is owned by approximately 31 limited partners.
• LNCMJ Management, LLC (“LNCMJ”): The management company, acting as the general partner for both PCAP and PCP. It is owned 50/50 by Mark and Christi Jensen and is governed by a board of managers consisting of Mark Jensen (CEO), Kellie Casse (EVP), and an independent manager, Matthew Kahn.

Business Segments

• PrimaLend Capital Partners, LP (“PCP”): The Company’s core business, which provides loans to BHPH dealers secured by their portfolios of RISCs.
  • As of Sept. 30, 2025, PCP’s loan portfolio totaled approximately $233.8 million, with 90% consisting of first-lien RLOCs and the remainder comprising subordinated loans.
• Good Floor Loans, LLC (“GFL”): Provides floor plan loans to dealers secured by their vehicle inventory. GFL works in tandem with PCP, allowing dealers to finance vehicle purchases via GFL and then monetize the subsequent sales by pledging the resulting RISC as collateral to PCP.
  • As of Sept. 30, 2025, GFL’s loan portfolio was approximately $24.6 million.
• PrimaLend Real Estate LLC (“PRE”): Offers loans to Dealer-Borrowers and their affiliates secured by real estate assets.
  • As of Sept. 30, 2025, PRE’s loan portfolio was approximately $20.2 million.

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Prepetition Obligations

As of the Petition Date, the Company’s capital structure includes approximately $286.1 million in total funded debt liabilities. The Company’s prepetition obligations are summarized below:

Senior Secured Debt

• PCP Credit Facility: Approximately $161.7 million is outstanding under an amended and restated credit agreement with CIBC Bank USA as administrative agent. The facility is borrowed by PCP and guaranteed by PCAP, LNCMJ, and certain individuals.
• GFL Credit Facility: Approximately $16.2 million is outstanding under a commercial credit agreement with Amarillo National Bank (“ANB”). The facility is borrowed by GFL and guaranteed by PCAP, LNCMJ, and certain individuals.
  • An intercreditor agreement between PCP and GFL establishes that PCP’s lien is senior with respect to a Dealer-Borrower’s RISC portfolio, while GFL’s lien is senior with respect to the dealer’s vehicle inventory.
• PRE Credit Facility: Approximately $8.6 million is outstanding under a credit agreement originally with ANB. In December 2024, the loan was purchased by PrimaLend Capital Group, Inc., a Company affiliate.

Senior Unsecured Notes

• Approximately $75.0 million in aggregate principal is outstanding under 6.50% Senior Unsecured Notes due 2028, issued by PCAP in July 2021.
  • The Company defaulted on the notes after failing to make the interest payment due on July 15, 2025.
  • Proceeds from the notes were loaned to the operating subsidiaries via intercompany notes: $61.5 million to PCP, $7.5 million to GFL, and $6.0 million to PRE.

Junior Subordinated Debt

• The Company has approximately $24.6 million outstanding in junior unsecured subordinated notes, which are divided into two categories:
  • $17.5 million owed to unrelated individuals and entities.
  • $7.1 million owed to individuals and entities related to or affiliated with the Debtors and their principals.

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Events Leading to Bankruptcy

The Company’s financial distress was driven by a confluence of macroeconomic headwinds that severely impacted the BHPH industry. The COVID-19 pandemic caused global supply chain interruptions that elevated used car prices. While government stimulus programs initially supported consumer auto payments, their cessation led to a significant increase in defaults. This was compounded by rapid inflation in 2022 and 2023, which prompted the Federal Reserve to aggressively raise interest rates, increasing borrowing costs for dealers and contributing to higher consumer defaults. The subsequent normalization of used car prices also reduced recovery values on repossessed vehicles, further straining dealers.

• Beginning in the second half of 2022, rising delinquency rates in the subprime auto market created a negative feedback loop for BHPH dealers, who lost a critical source of liquidity from RISC payments while simultaneously facing borrowing base limitations on their credit lines.
• These industry-wide pressures led to unprecedented losses for the Debtors and declining performance among certain Dealer-Borrowers.

Liquidity Crisis and Restructuring Efforts

• In August 2024, the Company experienced an over-advance on its CIBC credit facility. To cure the over-advance and deleverage, the Company sold over $34 million in loan participations to a non-Debtor affiliate, BVY Partners II, LLC (“BVY2”), during the fall and winter of 2024.
• Despite these efforts, liquidity stress continued, resulting in another over-advance on the CIBC facility and an over-advance on the ANB facility in January 2025. In February 2025, CIBC issued notices of default and demanded the Company hire a financial advisor, leading to the engagement of FTI Consulting and Spencer Fane.
• In July 2025, the Company enhanced its corporate governance by amending its management company’s operating agreement to establish a board of managers with an independent manager, Matthew Kahn, who was appointed to a Special Committee. The Special Committee subsequently retained Katten Muchin Rosenman to conduct an independent investigation into potential estate claims against related parties.

Sale Process and Path to Chapter 11

• The Company engaged Houlihan Lokey in July 2025 to pursue refinancing options and initiate a sale process. The marketing process yielded four indications of interest, with one party emerging as a potential purchaser.
• Negotiations with the potential purchaser and certain senior unsecured noteholders were complicated by consent rights held by BVY2 under the loan participation agreements. To resolve this, the Debtors reached an agreement in principle with BVY2 for an "Exchange Transaction," which would result in PCP reacquiring 27 loans unencumbered by the consent rights.
• With discussions ongoing with the potential purchaser and another party reaffirming its interest, the Debtors determined a Chapter 11 filing was necessary to stabilize operations. The Company negotiated a postpetition financing facility with its prepetition senior secured lenders to support its business and restructuring efforts.