CHARLOTTE, North Carolina – A U.S. Bankruptcy Judge assigned a trustee to take over BK Racing and replace car owner Ron Devine as the team’s financial decision maker Wednesday evening.
“It’s a sad day for BK,” Devine said after leaving the federal courthouse.
Said NASCAR in a statement: “We have a clear process around charter member governance. It is incumbent upon charter members to be ready to race and compete at the highest level.”
The judge’s decision allows the team to continue to race. One of the roles of the trustee will be to determine if the team remains a viable business and can make money. If not, an option would be to sell the team’s assets, including its charter.
“I think it’s in everyone’s best interests that this business continue in the short run,” Judge J. Craig Whitley said in making his ruling.
The team ranks 35th in car owner points after Gray Gaulding‘s 36th-place finish Monday at Martinsville Speedway.
Matthew Smith, managing director of The Finley Group, will oversee the BK Racing’s finances.
“The goal is to find a way to race as long as we can,” Smith said on the stand Wednesday.
Smith, a member of the North Carolina Motorsports Advisory Council for three years, noted that it was not clear how much cash BK Racing has, citing incomplete records and documents not filed in court.
Union Bank & Trust claims it is owed more $8 million. The IRS states that the team owes more than $2 million. Creditors have until April 26 to file claims.
BK Racing filed for Chapter 11 bankruptcy on Feb. 15. Devine said on Feb. 16 that he filed for bankruptcy “because the bank wouldn’t stop trying to get a receiver (to oversee the team’s collateral). The only reason they wanted to get a receiver was to push the charter off to their third-party offer. That’s where the problem was.’’
BK Racing has not shown a profit since debuting in 2012. Court documents show that the team lost nearly $30 million from 2014-16.
A former employee and a current employee of the team both testified Wednesday of paychecks that bounced last year. Former tire specialist Jason Postma testified he had a BK payroll check bounce in September 2017 and had BK payroll checks bounce in November 2017 and December 2017 before leaving the team.
“We need someone to step in temporarily and stop this from snowballing,’’ testified Jeff Lemons, who runs the machine shop at BK Racing, on having a trustee appointed.
The team sold one of its charters before the 2017 season to Front Row Motorsports for $2 million. Devine, who spent five hours on the stand over two days, stated in court and he thought the bank’s goal is to sell the charter to recoup some of money owed.
“I’m disappointed, obviously,” Devine said of Wednesday’s decision. “We’ll see. The judge made his ruling. I respect that. We’ll talk about if there’s a next step, an appeal or anything like that.”
Devine said he planned to talk to sponsor EarthWater, which had signed an agreement last week to sponsor the team for the rest of year. The contract is valued at $3.6 million and can be paid in cash, EarthWater stock and product. There is a clause in the contract that the contract is null and void if Devine is not operating the team.
The judge encouraged Devine and BK Racing’s employees to work with Smith, the trustee, to help the team recover from its financial debt. Devine said he was unsure if he would do so.
“My sense is that he probably just wants me to get out of his way,” Devine said.