One of the world’s leading dealers in premium classic cars is racing to secure new funding within days after the discovery of “financial irregularities” left its lenders facing a multimillion pound write-off.
Sky News has learnt that JD Classics, which is based in Essex and boasts of its links to the Goodwood Revival and Le Mans Classic, has been put up for sale in recent weeks.
The emergency auction raises doubts over the future of the owner of more than 110 valuable classic cars, including vehicles made by Aston Martin, Ferrari, Jaguar and Maserati.
Advisers at Alvarez & Marsal (A&M), who are said to have been brought in at the request of lenders including Lloyds Banking Group, JD’s main provider of bank finance, have asked prospective buyers to table final bids next Tuesday.
Lenders are understood to be facing a loss of as much as £25m on its exposure to the company, according to one insider.
In a sale document seen by Sky News, A&M said “the opportunity to acquire JD reflects the need to return value to stakeholders following the discovery of certain financial irregularities within the business”.
“Whilst an investigation into these matters is ongoing, a new management team is now in place and the individuals associated with these irregularities are no longer working in the business.”
Sources said on Friday that the privately owned company had been involved in various episodes of apparently fraudulent activity relating to the sale of cars to which it did not have titles.
Earlier this year, Derek Hood, JD Classics’ founder, was sued by Mike Tuke, a businessman who had made a multimillion-pound fortune from the sale of his prosthetics company.
In a judgment handed down in April, Mr Hood was found to have engaged in “deliberate and dishonest conduct” in his dealings with Mr Tuke.
A number of other legal claims are thought to be ongoing, while Mr Hood left JD several months ago.
It was unclear how or by whom the investigation referred to by the A&M document was being conducted.
Mr Hood was replaced by Jean-Marc Gales, the former chief executive of Lotus Group, the luxury car manufacturer.
He is said to have identified a number of potential cost savings and growth opportunities for JD, which owns a 100,000 square foot facility in Maldon where its technicians and engineers work on classic cars.
JD, which was founded in 1987, trades from a network of showrooms in Essex, Mayfair and Newport Beach, California.
Its technical experts restore racing cars which have won some of the most prestigious races in the world, including the Monaco Historique, while JD’s team has won awards at major events on the classic car calendar, such as The Quail and Salon Prive.
JD was sold two years ago to a consortium led by Charme Capital Partners, a private equity firm based in London, Milan and Madrid.
Co-investors in that deal included deCAR Partners, which invests in vintage luxury and fine art-related companies, and FiveW Capital, another financial investor.
The classic car market is worth roughly £3bn annually, and is “considered attractive being an asset-backed investment class which has achieved a 10-year compound annual growth rate of c.14%,” the A&M sale document said.
Profit forecasts produced by A&M suggest that JD is likely to lose £3m this year but swing back into the black in 2020.
Announcing the appointment of Mr Gales in June, Charme said he would “deliver our shared vision for this business as the full-service and truly global destination for classic car collectors and enthusiasts”.
Mr Gales previously worked for Fiat, Mercedes-Benz and Volkswagen, and is thought to be likely to continue to run JD after any sale takes place.
In its accounts for the year to 30 April 2017, which were signed off by PricewaterhouseCoopers, its auditor, JD said it had recorded a net profit of £17.4m.
The same accounts said JD was looking to expand its client base in Europe and the rest of the world and that its directors were “confident of the future prospects”.
From – SkyNews