Barwood Finds Tentative Buyer for Taxi Assets in Bankruptcy Case
Regency has agreed to acquire much of Barwood's operations; proposal to go before judge for approval
FILE PHOTO BY AARON KRAUT
This story was updated at 4 p.m. Dec. 7.
A deal is in the works for Barwood Inc. and its affiliates—the largest taxi network in Montgomery County—to sell most of their assets to pay off debts under a bankruptcy case.
Under a proposal filed in court on Tuesday, much of Barwood’s operations would be purchased by Regency Cab, which also operates taxi service in Montgomery County.
Regency, which is based in Gaithersburg, would acquire Barwood and its affiliated cab companies, but not Fleet Tech, Barwood’s maintenance garage for servicing its vehicles. The proposal is subject to a judge’s approval.
Alan Grochal, an attorney with the Baltimore firm Tydings & Rosenberg LLP representing Barwood, said Thursday morning that there are about 440 vehicles in the Barwood fleet. Of those, Regency would acquire 100 vehicles to provide taxi service and another 159 vehicles that it would resell.
Also in the fleet are 181 “affiliate” vehicles, which drivers own and operate through their own passenger vehicle licenses.
Regency would pay Barwood $750,000 under the acquisition agreement.
The agreement figures on about $450,000 in revenue coming from drivers through an existing Barwood lease purchase program. Barwood also could draw on an additional $185,000 in a currently restricted account to pay off tort claims.
There is no estimate on how much money would be generated from Regency selling the other 159 vehicles it takes over from Barwood and from the sale of passenger vehicle licenses.
Grochal said Regency has about 120 cabs.
He said Regency is not acquiring Fleet Tech assets, which could be sold separately to other buyers.
No one at Regency was immediately available to comment on Thursday afternoon.
Barwood was founded in 1964 with 45 taxis, according to court papers.
This is Barwood’s second bankruptcy case in about 10 years. Both were under Chapter 11, a reorganization of debts, rather than Chapter 7, a liquidation of assets.
The first bankruptcy was filed in 2007 and resolved in 2010. The second, current filing was in December 2016.
The debtors are listed as Blue Star Group, which is a management company, along with Barwood, Checker Transportation Co., City Lease, Fleet Tech and Silver Spring Transportation Co.
Court papers filed in December 2016 for the second bankruptcy case reported Barwood held about $4.5 million in assets and $5.4 million in liabilities.
Grochal on Thursday estimated the current liabilities to be $1 million in secured debt from the first bankruptcy; $250,000 in tort claims; $600,000 with trade creditors, or suppliers; and about $150,000 in legal fees.
Barwood CEO Lee Barnes has said that competition by Uber and Lyft, which do not have regulations and fare structures that apply to the taxi industry, have damaged his businesses. In particular, court papers say, the ride-hailing businesses have siphoned away drivers.
To try to compete, the Barwood companies started two lease-purchase programs, in which drivers could lease either a passenger vehicle license or the license and a vehicle for 114 weeks, before they would own them, the latest court filing says.
“While the program proved to be moderately successful,” court papers say, “the Debtors determined that they would be challenged to maintain profitability during the approximately two year term of the programs. Accordingly, in July 2017 the Debtors began attempting to sell the business as a going concern.”
The tentative agreement with Regency follows unsuccessful attempts by Barwood to work out other deals.
A plan in an Aug. 18 court filing called for the Barwood companies to sell about 20 percent of their operations.
At the time, two potential buyers were listed in court papers, but not by name. Barnes said then that a company out of state made an offer. The other potential buyer, a local company that Barnes declined to name, had not made an offer.
New court filings from this month indicate that Barwood contacted one international company and several local companies to try to arrange a sale. Barwood received two letters of interest, but neither led to a sale.
On Nov. 28, Barwood approached Regency about a possible acquisition. The companies worked out a deal on Dec. 4, court papers say.
Grochal said it’s unlikely that the Barwood name would disappear as a local taxi service. The new owner would want to continue the Barwood companies because of the brand recognition with customers, he said.
A hearing to consider approving the Regency acquisition is scheduled for Dec. 19 at U.S. Bankruptcy Court in Greenbelt. Grochal said the deadline for anyone to file objections to the deal is Dec. 15.