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BK Racing to be sold to satisfy creditors

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CHARLOTTE, N.C. — BK Racing will be sold, the court-approved trustee operating the team said after a hearing Tuesday. Discussions are underway.

“We’re selling a race team, we’re not just selling a charter,’’ said Matt Smith, the trustee operating the team while it is in Chapter 11 bankruptcy. “So the charter is the largest asset in this case but it’s not the only asset. This is a viable race team and we’re trying to prove that each and every week. We’re meeting obligations of NASCAR by showing up and competing in good faith.

“This isn’t just a liquidation. What brings the best result to all creditors is the sale of a race team not just the sale of an asset.”

Smith would not reveal any potential suitors but said: “We’re looking at buyers that we would think do right by this team, that would be good for NASCAR, good for creditors and good for the employees. We’re looking for the right buyer that has the right offer for this team.”

Smith said that there have been conversations with “parties about their interest and trying to understand what their interest is and how they might be interested in putting an offer together.”

Any sale would have to be approved by the court and the trustee would have to show that he got the best price for the sale. Smith had no timetable for when the sale could be completed but said it would be “as soon as it is practical and works for the buyers and works for the requirement of the bankruptcy court.” Smith said that any buyer would get the team and not the liabilities the team faces.

“I think there needs to be a change in ownership in the team, and I think this process will do that,” Smith said. “I’m working really, really hard to make sure we get the right outcome for this team.”

Ron Devine was among those who started the team. BK Racing made its Cup debut in 2012. Devine had been a part of the ownership since. With mounting bills, including $9.25 million owed to Union Bank & Trust, BK Racing filed for Chapter 11 bankruptcy on Feb. 15, three days before the Daytona 500. Devine said he made the filing to keep the bank from taking control of the team’s charter and selling it to reclaim money from loans owned.

Smith was approved by the court on March 28 to take over as trustee and operate the team, relieving Devine of his duties.

Gray Gaulding has driven the team’s No. 23 car all season. Gaulding finished 31st Sunday at Michigan International Speedway. The team is 35th in the car owner standings and ranks ahead of only one other team that has a charter.

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Judge tells BK Racing owner that trustee is in charge of team

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CHARLOTTE, N.C. — The judge overseeing BK Racing’s bankruptcy case reminded team owner Ron Devine that he has no management role at this time and that a court-approved trustee is in charge of the team.

The comments came during a status hearing Tuesday in federal court.

BK Racing filed Chapter 11 bankruptcy Feb. 15. Devine said Feb. 16 the bankruptcy filing was made to keep Union Bank & Trust from potentially getting the team’s charter. The bank claims that BK Racing owes it more than $8 million.

A trustee was assigned to the team March 28.

Devine asked the court for access to a camera system in the race shop that he can monitor on a mobile device to show potential investors or sponsors what takes place there and better understand the sport.

The attorney for trustee Matthew Smith noted that Devine has met potential sponsors and investors, creating a question of who is in charge of the team.

Devine said in court: “It’s new to me our relationship has deteriorated. … I’ve tried not to be disruptive. … I’ve taken a lesser role. Even at the Dover race I didn’t wear a headset.’’

Judge J. Craig Whitley told Devine: “Bottom line, the trustee is running the race team.’’

The judge told Devine that he had no management rights and if that was unclear from before, he apologized.

Also in court Tuesday, the trustee presented a budget through June 24 for the team. No details were revealed in court. 

BK Racing, which has Gray Gaulding as driver, is 35th in owner standings. Gaulding is coming off a 30th-place finish at Dover. His best finish this season is 20th in the Daytona 500 and at Texas Motor Speedway. His average finish this season is 30.1.

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Bankruptcy judge appoints trustee to manage BK Racing

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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.

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Friday 5: Passion on and off the track

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There’s been much to talk about this season but some of the conversation has centered more on what has happened off the track.

Maybe Kyle Busch can help return the talk to the track this weekend at Martinsville Speedway.

Admittedly, three of the first five races having a margin of victory of 2.6 seconds or more (last week Martin Truex Jr. won by 11.6 seconds) takes away some of the excitement for some even as Kevin Harvick won three races in a row.

Other than Harvick’s dominance, some of the buzzy topics this season has been Harvick talking about the need to build up grassroots racing, why Busch wasn’t interviewed on TV after last weekend’s race at Auto Club (and then his responses to Twitter trolls) and how Austin Dillon and members of his team got tattoos on their rear end after winning the Daytona 500.

All worthy topics to generate conversation, but the discussion on the racing hasn’t been as paramount to this point.

Martinsville comes just in time to change that. The series is back at the track for the first time since Denny Hamlin’s contact knocked Chase Elliott out of the lead late in the fall race and fans saw a level of emotion they hadn’t seen from Elliott. If you don’t recall, Busch went on to win that race.

Last spring had its excitement with Ricky Stenhouse Jr. bumping Busch out of the way to stay on the lead lap, opening the door for Elliott to win a stage. Later in that race, Brad Keselowski and Kyle Busch engaged in a spellbinding duel before Keselowski pulled away and went on to win. Busch finished second.

Right now, Busch is one of the main drivers who stirs the drink in a sport that has seen fan favorites Dale Earnhardt Jr., Jeff Gordon and Tony Stewart, among others, retire.

Even Earnhardt said as much on his podcast this week.

“The one thing that I’ve learned over the last several years … was the sport needs people like Kyle,’’ Earnhardt said on the Dale Jr. Download. “Even if you don’t like the guy, the sport needs all kinds of personalities, and we can’t have 40 heroes out there racing.

“We can’t have 40 Captain Americas out there competing against each other. You gotta have a Batman, you gotta have a Robin, you gotta have a Superman, you gotta have a Joker. You gotta have all of that to create storylines and create rivalries.”

The sport’s best rivalry is Keselowski and Busch. It’s one that simmers and then explodes, whether it is in their duel at Martinsville last year, their contact at Watkins Glen, Busch’s Twitter response to Keselowski after Keselowski’s comments about Toyota’s dominance entering the playoffs or Busch simply saying at the news conference before last year’s Miami championship race of Busch: “Sometimes you just don’t like a guy.’’

This weekend could be a chance for such feelings to bubble or maybe from somebody else. With an off weekend afterward, it would give fans something to talk about.

2. An impassioned defense

BK Racing car owner Ron Devine was combative at times, calling the procedure “nonsense” while on the stand for about 2 1/2 hours Thursday in federal bankruptcy court.

Devine, who turned to address the judge at times when answering questions from attorneys, was on the stand defending his right to run BK Racing despite millions of dollars in losses in recent years and unpaid bills.

Union Bank & Trust, which claims it is owed more than $8 million in loans from Devine, seeks to have a trustee put in charge of the team. Union Bank & Trust stated in documents filed in U.S. Bankruptcy court that BK Racing had lost about $30 million from 2014-16.

MORE: Court filing lists expenses, revenue for each race 

MORE: Rare peek into race purses, payouts

Devine said on the stand that the team had signed a sponsor agreement Wednesday with EarthWater for $3.6 million for the rest of the season. The amount is to be paid in cash, shares of stock and product. Devine said that if the judge ruled to have a bank-appointed trustee run the team, the sponsor would not remain, noting a line that in the agreement that the deal was null and void if Devine was not running the team.

Devine, who said his organization had “low teens” in terms of full-time employees, stated that those employees would quit if a trustee took over. Devine said the only reason the bank wanted a trustee was to sell the team’s charter. He accused the bank of soliciting bids for the charter.

Turning to the judge, Devine said of having a trustee run the team instead of him: “There’s no way he can operate the team. He has no knowledge and ability to operate my team.’’

Devine estimated he had spent half a million dollars of his own money since December to offset deficits at BK Racing. During the testimony, Devine confirmed that he sold one of the team’s charters before the 2017 season to Front Row Motorsports for $2 million.

“I can run this race team,’’ Devine said in court.

The matter has been continued until Wednesday.

3. West Coast review

While Kevin Harvick dominated the West Coast swing, winning two of the three races, Kyle Busch had the best average finish for the events at Las Vegas, Phoenix and Fontana.

Of course, Harvick’s 35th-place finish Sunday after contact with Kyle Larson ruined his average finish.

Here’s who had the best average finish for the three races:

2.3 — Kyle Busch

3.3 — Martin Truex Jr.

7.7 — Kyle Larson

8.0 — Erik Jones

8.3 — Brad Keselowski

Here’s who scored the most points in the three races:

147 — Martin Truex Jr.

146 — Kyle Busch

125 — Brad Keselowski

120 — Kyle Larson

115 — Kevin Harvick

Kevin Harvick, Kyle Busch and Martin Truex Jr. combined to lead 75.2 percent of the laps run on the West Coast swing. Harvick led 252 laps, Busch led 200 laps and Truex led 134 laps.

4. In case you missed it …

Only three drivers scored a top-10 finish in each of the three West Coast swing races: Kyle Busch, Martin Truex Jr. and Erik Jones.

5. Back in time

Jimmie Johnson has nine career Martinsville victories (in 32 starts for a winning percentage of 28.1 percent) but has two top-10 finishes — including a win in October 2016 — in the last seven starts there. He’s led only in two of those seven races. He once had a streak of 17 consecutive top-10 finishes there, including six wins.

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BK Racing owner explains reason for filing Chapter 11 bankruptcy

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DAYTONA BEACH, Florida — BK Racing owner Ron Devine said his team filed Chapter 11 bankruptcy to keep Union Bank & Trust from taking control of the team’s charter and selling it.

BK Racing filed Chapter 11 bankruptcy Thursday afternoon in Western District Court of North Carolina. In its bankruptcy filing, BK Racing estimated the number of its creditors as 50-99. The team estimated its assets as more than 10 million and estimated liabilities of more than $10 million.

The filing came shortly before a hearing was scheduled Thursday in Mecklenburg County Superior Court on Union Bank and Trust’s request to have a receiver to oversee BK Racing’s collateral. Union Bank & Trust claims that BK Racing owes it more than $8 million in outstanding loans. Among the most valuable pieces of BK Racing’s collateral is the charter it has for the No. 23 car that Gray Gaulding will drive in the Daytona 500.

“I filed (Chapter 11 bankruptcy) because the bank wouldn’t stop trying to get a receiver (to oversee the team’s collateral),’’ Devine said. “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.’’

Devine said he felt that he and the bank came close to resolving their issues before time ran out. He plans to meet with the bank next week and continue discussions.

The Chapter 11 bankruptcy listed 20 creditors with the largest unsecured claims. The largest was to Race Engines Plus for $569,539.95. Devine said matters have been resolved for the team to use the company’s engine and race this weekend but more needs to be done.

“We’re either going to fix it or we’re going to have to change,’’ Devine said of the engine company. “I think the relationship is what has to be fixed between me and Joey (Arrington, founder of Race Engines Plus). Fixed or changed or something. I actually think (Chapter) 11 will help us be able to have a conversation.’’

So how does Devine, who has owned various businesses and been involved in commercial and residential real estate development for more than 30 years, find himself in a such a financial position with his race team?

“I think it’s a tough business,’’ he said. “I think it’s an expensive learning curve. You’ve got to decide where you are taking the company. I took it down a very independent route. Probably wasn’t the smartest. I think the right thing to do is get an alignment.

“If I had any inclination of getting out, I would have let them do the receiver and just gone quietly into the sunset. I still see in the last unpioneered sport in the country, that NASCAR is going to be one of the premier sports in this country and I want to be a part of that. I still believe that. I think it’s going to be spectacular. I think it’s going through a transition. It’s headed in the right direction.’’

How does he get his team to where he wants to be competitively?

“We got to stop the nonsense,’’ Devine said. “We’ve got to get this thing worked out with this bank. Then we’ve got to get ourself together and on a platform that we can run and race competitively.’’

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