Carbiz careens out of business

Carbiz careens out of business

Sarasota-based Carbiz Inc. has closed amid growing debt.

On Friday, Feb. 12, the company issued a Securities and Exchange Commission filing saying it turned over all of its assets to its two senior secured lenders, Dealer Services Corp. and Wells Fargo Preferred Capital Inc., and has ceased operations.

On Jan. 22, the company reported the Dealer Services Corp. and Wells Fargo, had served Carbiz with default notices on debts totaling $28 million.

Carbiz, car dealership operator and consulting company, had been unable to make it monthly payment to Dealer Services in August, but had worked out a deferment with by paying a deferral fee of $350,000.

But following the deal, Carbiz says Dealer Services stopped funding new car inventory, which prevented Carbiz from replacing sold cars. Carbiz says in a separate SEC filing that the lack of credit forced it to negotiate a deferral for $700,000 for two additional monthly payments to DSC in September and October.

In the January filing, Carbiz reported that “Without further funding from DSC and/or Wells Fargo, and without the ability to use the payments on the leases and loans that secure the indebtedness to DSC and Wells which are pledged as collateral to DSC and Wells Fargo, along with all of the Company's other assets, the Company will have no ability to make payroll or pay its other debts, and will likely be forced to file for bankruptcy in the very near future.”

The recent financial troubles come shortly after a major expansion push by the company starting in late 2007 that caused Carbiz to take on a lot of additional debt. In October of 2007, it purchased 26 dealerships in seven Midwestern states from Astra Financial Services Inc. and Calcars AB Inc. for $18.5 million. The company also borrowed heavily to operate and grow its dealerships operations.