1 Global, 1 West file suit tied to default on cash advance agreements

By Caroline Salls

Pittsburgh, Dec. 17 – 1 Global Capital LLC and 1 West Capital LLC filed a lawsuit Friday against Momentum Automotive Management, LLC (MAM) and Momentum Auto Group, Inc. (MAG) and numerous related entities and junior creditors, according to a filing with the U.S. Bankruptcy Court for the Southern District of Florida.

1 Global said it referred Momentum to 1 West in October 2017 when it needed additional financing for the operation of its businesses. 1 West is authorized to provide merchant cash advance services (MCAs) in California, where Momentum’s dealerships are located.

As a result, 1 West subsequently entered into a series of nine written MCAs with Momentum entities.

In exchange for the cash advances, Momentum authorized 1 West Capital to receive a fixed daily amount from Momentum’s future receivables until an agreed-upon amount of future receivables was reached.

1 Global said each of the MCAs also provided 1 West Capital a security interest in “all of merchant’s assets.”

On Oct. 13, 2017, 1 West and MAG entered into the first of the MCAs, under which 1 West purchased future receivables from MAG in the amount of $6.75 million in exchange for a purchase price paid to MAG in the amount of $5 million.

In February 2018, Momentum had fallen behind in its obligations under the first merchant agreement and was also $7.5 million behind on loan payments to other “floor play lenders.” Momentum also owed $6 million in California sales tax and $2 million in payroll taxes at that time and said it needed $4 million in additional funds to complete renovations to one of its dealerships.

The complaint said Momentum asked 1 West to provide additional cash advances to give it time to explore a potential sale of its dealerships or, alternatively, to obtain a bridge loan to satisfy its existing debts and keep the dealerships in operation until cash flow improved.

Momentum and 1 West entered a framework agreement on Feb. 14, 2018 under which MAM agreed that all other merchant cash advance providers that had also provided MCAs to Momentum would enter into a subordination and standstill agreement with 1 West Capital.

In exchange, 1 West agreed to provide additional funds to Momentum, purchasing future receivables in several transactions.

However, 1 Global said Momentum was still in default in delivering receivables to 1 West Capital in July 2018 and said it needed even more financing to continue operations.

In November, Momentum closed all but one of its dealerships “in the face of mounting financial problems,” according to the lawsuit, with Momentum claiming that the dealerships would “reopen under new management before the end of the year.”

1 Global said the California DMV Investigations Division confirmed in November that it had an “open and ongoing investigation on the Momentum Auto Group.”

Through the lawsuit, the plaintiffs said they are asking the court to rule that the junior MCA creditors rights to receive payment from Momentum are subordinated to 1 West’s right to be paid in full and that the junior creditors cannot enforcement any Momentum payment obligations until 1 West is paid in full.

1 Global is a Hallandale Beach, Fla., business lender. The company filed for bankruptcy on July 27 under Chapter 11 case number 18-19121.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.