Front Row Motorsports placed the winning bid for the majority of the assets
BK Racing has accumulated debt totaling $44,295,884
BK Racing filed for bankruptcy just ahead of the 2018 Daytona 500. Soon after, the courts appointed a trustee, Matthew Smith in charge of team.
Smith has operated BK Racing since the end of March. The Monster Energy NASCAR Cup Series team operations continued as usual as he setup the best way to acquire funds to pay back some of the debt acquired.
On Monday, the bidding for the NASCAR teams assets has now concluded. Front Row Motorsports came out with the winning bid of $2.08 million. They beat out several bidders for a bulk of the teams assets, most notably the team’s charter.
Competing bids included a bid from GMS Racing for $1.8 million. BK Racing owner Ron Devine was expected to make a bid for his own team, per his own words. He put together a new company to make the bid. However, by the time he had all that and the funds in place, it was too late to make a bid.
The trustee has also agreed to sell other assets to Obaika Racing for $265,000. Rick Ware Racing has placed a bid of $35,000 on a tractor.
Front Row Motorsports, the winning bidder of primary team assets already owns three charters. They use two of them, one for the number 34 of Michael McDowell and the other for the number 38 of David Ragan. Their third charter is currently being leased to TriStar Motorsports.
NASCAR only allows charters to be leased for a single season. After that, the team has to use it themselves or it defaults back into the hands of NASCAR. In addition, that leased charter is likely to be in legal suit as Union Bank & Trust claims ownership due to unpaid loans from the owner of BK Racing. The charter was used as collateral on the loans that went unpaid by BK Racing.
Michael Martinez, attorney for trustee Matthew Smith is ‘disappointed’ that the assets only drew a total of $2.38 million in the auction. Ahead of the 2017 season, Front Row Motorsports purchased a charter from BK Racing (the one they are currently leasing). The value of that charter was $2 million.
A charter used to be valued much higher than today. The charter offers a guaranteed starting position in the NASCAR race on Sunday. Since that charter purchase in late 2016, car counts have dropped and in most cases cars aren’t sent home following qualifying. Thus, the value of a charter has gone down.
If the sale goes through, Front Row Motorsports would have to field a third car to maintain ownership of the charter. The total of all items from the auction would total $2.38 million. The trustee will now determine how much the creditors are paid from the potential sale.
A total of 78 claims have been filed against BK Racing. Adding those up, the team is currently $44,295,884 in debt. The creditors vary from the engine supplier, tire and wheel supplier, the bank, the IRS and many more. The bank has placed several fines on the initial loan due to missed payments, increasing the amount owed.
A $50,000 ownership transfer fee must be paid to NASCAR to facilitate the move of the charter to Front Row Motorsports. Additionally, $68,046 in BK Racing entry fees must be paid to NASCAR that have not been paid.
The highest bid from Front Row Motorsports still needs to be approved by both the court and NASCAR. U.S. Bankruptcy Court and Judge J. Craig Whitley have set a hearing for Thursday to determine if the sale is in the best interest of the organization.
The team has had a wide range of driver pilot their machine in 2018. Gray Gaulding, JJ Yeley, Blake Jones and Spencer Gallagher have all driven the #23 BK Racing machine in the 2018 season.
Gaulding drove the car to a 20th place finish at Daytona International Speedway and Texas Motor Speedway. JJ Yeley had the best finish of 18th, he made that run in the Daytona July race.
Update: Sale approved
The sale of BK Racing for $2.08 million to Front Row Motorsports has been approved by the court. The team is now scheduled to field a third entry at Darlington Raceway in the coming weeks.
Currently, Front Row Motorsports field two full-time Ford entries in the MENCS division with a third charter that’s leased to Tri-Star. The BK Racing equipment that was purchased are Toyota powered.
As of now, Front Row Motorsports general manager Jerry Freeze is unclear if they will field the Toyota’s or not. They are also unsure of the driver for Darlington as well as the car number. With the added charter, the are now a three car team for 2018.
Front Row Motorsports must use the field a car at Darlington and for the rest of season to keep the charter they just purchased. However, it’s unclear if the team will remain a three car operation for 2019.
In the past when the team entered a third race car they used the number 35. BK Racing has used the number 23.
The former owner of BK Racing, Ron Devine objected the sale. However, the court have allowed the sale to proceed.
“We’re not disappointed with the buyer … while I am disappointed we didn’t have more budding and a higher purchase price for the team,” said Matthew Smith, the trustee for BK Racing.
“I’ve got other options,” Devine said. “I still love NASCAR. I believe the NASCAR business is special and headed in the right direction. At the very least he should be embarrassed. … I thought we put up a good fight.”
“Is the price fair and reasonable?” Judge Whitley asked whiling giving his final ruling to approve the sale. “Fair and reasonable compared to what? … We got what we got.”