U-Save Auto Rental parent Franchise Services of North America (FSNA) has had its Chapter 11 bankruptcy protection filing dismissed. The Court ruled that Franchise Services of North America and CEO Tom McDonnell had improperly proceeded with the bankruptcy filing without the consent of its largest shareholder, Boketo, LLC, a subsidiary of Macquarie Capital (USA) Inc.
(UnhappyFranchisee.Com) The United States Bankruptcy Court For The Southern District Of Mississippi has rejected the Chapter 11 bankruptcy filing of Franchise Services of North America (FSNA), the parent company of U-Save Holdings, franchisor of U-Save Auto Rental.
The Memorandum Opinion Dismissing the FSNA Bankruptcy issued by Judge Edward Ellington lists the numerous entities tied to the seemingly sinking FSNA ship:
FSNA owns U-Save Holdings. U-Save Holdings owns 100% of the stock of U-Save Auto Rental. U-Save Auto Rental owns 100% of the stock of Auto Rental Resource Center, Inc., U-Save Car Sales, Inc., Practical Rent-A-Car System, Inc., Hollywood Call Center, Inc., U-Save Leasing, Inc., and Peakstone Financial Services, Inc. The following brands are owned by FSNA and it subsidiaries: U-Save Car & Truck Rental, U-Save Car Sales, Auto Rental Resource Center, Xpress Rent A Car, Sonoran National Insurance Group, and Peakstone Financial Services. “These franchisees, along with independent car rental associates under the ARRC model, operate more than 650 locations throughout the United States, which makes U-Save one of North America’s largest franchise car rental companies. U-Save currently services 25 airport markets in 10 different states and 15 countries.”
FSNA Filed Bankruptcy Without the Required Consent of its Largest Shareholder
U-Save Auto Rental franchise owners who feel they’ve been screwed over by their franchisor and CEO can take some consolation: At least they haven’t lost as much as Macquarie Capital.
Macquarie Capital incorporated Boketo LLC in 2012 in Delaware in order to implement an investment in FSNA. According to court documents, “Boketo invested $15 million in FSNA in order to allow FSNA to acquire a business called Advantage from Hertz.” Boketo is 100% indirectly owned by Macquarie. In exchange for this investment, Boketo was given a 49.76% interest in FSNA in the form of Series A Preferred Stock. Boketo became the largest single shareholder of FSNA.”
As part of the transaction, FSNA agreed to pay Macquarie a Financial Advisory Fee of $500,000.00, and an Arrangement Fee of $2,500,000.00.
To date, FSNA has paid neither of the fees, which are the subject of litigation between FSNA and Macquarie in the State of New York and related litigation in the United States District Court in the Southern District of Mississippi.
According to the judge’s ruling, the FSNA Certificate of Incorporation clearly states:
[T]he Corporation shall not and, in the case of clause (2) below, shall not permit any subsidiary to, directly or indirectly (whether through merger, consolidation, amendment to this Certificate of
Incorporation or otherwise), do any of the following without first obtaining the written consent or affirmative vote of (i) the holders of a majority of the shares of Series A Preferred Stock then outstanding,
voting separately as a class (a “Preferred Majority”), and (ii) the holders of a majority of the shares of Common Stock then outstanding, voting separately as a class:
. . . .
(3) effect any Liquidation Event
FSNA and CEO Tom McDonnell, it appears, were trying to pull a fast one by filing for bankruptcy without the consent of its 49.75% shareholder, Boketo, LLC.
Boketo LLC, Macquarie Capital and Judge Edward Ellington obviously called them on it… and Chapter 11 bankruptcy protection has been dismissed.
Did FSNA CEO Tom McDonnell Commit Bankruptcy Fraud?
Tom McDonnell – you may recall – once held himself out as a Christian businessman who operated according to biblical principals and started the workday with office Bible study and prayer sessions.
In a separate post we’ll explore the question of whether Tom McDonnell committed bankruptcy fraud, a serious crime that can result in fines up to $500,000 or imprisonment for up to 20 years, or both.
Read it here: Is U-Save Auto Rental CEO Tom McDonnell Guilty of Bankruptcy Fraud?
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TAGS: FSNA, Boketo, LLC, Macquarie Capital, U-Save bankruptcy, Franchise Services of North America bankruptcy, FSNA bankruptcy, U-Save franchise complaints, U-Save, U-Save franchise, U-Save complaints, U-Save Car and Truck Rental, U-Save Car and Truck Rental franchise, Tom McDonnell, Thomas McDonnell III, Michael John Silverton, Daniel Raymond Boland, U-Save Holdings Inc., Franchise Services of North America Inc., FSNA, Boketo, LLC, Macquarie Capital Inc.