🚗New Chapter 7 Bankruptcy Filing - Tricolor Holdings, LLC🚗
Non-discriminatory fraudster co. preyed on the poor and wealthy alike, files chapter 7
We mentioned “buy here-pay here” subprime auto-dealer-and-lender Tricolor Holdings, LLC and its seventeen affiliates’ (collectively, the “debtors”) chapter 7 explosion in the Northern District of Texas (Judge Larson) back on September 10, 2025 during our coverage of First Brands Group LLC (“FBG”):
There were, at the time, a lot of initial headlines (all thematically similar to these):
Man. Fraud “allegations” be everywhere these days. “Irregularities” …
… amirite? Most on point for the debtors, in a September 5, 2025 8-K, Fifth Third Bancorp. ($FITB) spilled the beans:
“Fifth Third Bancorp (the ‘Bancorp’) recently discovered alleged external fraudulent activity at a commercial borrower of Fifth Third Bank, National Association associated with their asset-backed finance loan.
On September 5, 2025, the Bancorp concluded that a material charge for impairment would result from this alleged external fraudulent activity. The outstanding balance on this loan is approximately $200 million. Based on currently available information, the Bancorp currently estimates that the non-cash impairment charge associated with this asset-backed finance loan, which would be recognized in the third quarter of 2025, will be in the range of $170 million to $200 million.
The Bancorp is working with the appropriate law enforcement authorities in connection with this matter.”
The alleged duping extended beyond FITB too. JPMorgan Chase Bank, N.A. ($JPM) also has $170mm in exposure, and here’s an excerpt from Origin Bancorp, Inc. ($OBK)’s September 7, 2025 8-K:*
“The Bank currently has total loan commitments to Tricolor of approximately $30.1 million to Tricolor, which are primarily secured by notes receivable.”
Which is small 🥔🥔🥔 comparatively, but that wasn’t the main point of OBK’s filing.
Instead, they wanted everyone to know that former debtor CEO Daniel Chu …
… an OBK board member and proverbial fox in the hen house, had made OBK’s life far easier (and future brighter) by resigning.
No doubt a welcome development for OBK since it is becoming clearer by the day that Mr. Chu’s business and its view toward “responsibility” …
… might be are pure bullsh*t.
All in, the debtors took investors for over $2b in asset-backed bonds over the last five years.
Only g-d knows how much they’ll ultimately get back. As facts start to trickle out, things ain’t looking particularly good.
And one area of focus has been, per the FT: “… whether Tricolor pledged the same collateral on multiple loans …”
But to ask the question is to answer it. Let’s shoot over to an October 3, 2025 hearing where McDermott Will & Schulte LLP’s Chuck Gibbs, counsel to chapter 7 trustee Anne Burns, let the court in on what everyone, by then, already knew:
“[The debtors’ business] appears to be a pervasive fraud of rather extraordinary proportion.”
“Pervasive” and “extraordinary” are apt. Per Bloomberg, the same day:
“An initial review of bankrupt subprime auto lender Tricolor Holdings’ records shows that at least 29,000 loans pledged to creditors were tied to vehicles already securing other debts.
Roughly 40% out of some 70,000 active Tricolor loans — which were used as collateral for bank warehouse lines and asset-backed securitizations — contained attributes identical to those of at least one other loan, including vehicle identification numbers, according to people involved in the probe, who asked not to be identified discussing sensitive information.”
Holy hell, Mr. Chu, we look forward to your future penal offering:
Anyway, not news investors were hoping for when the market took a rapid dump on their bonds in the weeks prior.
We’d extend the timeline further back, but lol, it doesn’t exist. That issuance hit the market in June’ 25.
But let’s get back to the bankruptcy because extraordinarily pervasive fraud ain’t gonna stop the trustee from trying to … uh … run the debtors’ business?
Yeah, that is precisely what she asked to do on September 26, 2025, despite simultaneously disclosing she really couldn’t:
“As of the filing of the Motion, the Trustee has not received any financial information from counsel to the Debtors about the their business, including (i) the location of assets and funds, (ii) whether the tangible assets, such as vehicles, are in secure locations or are vanishing without a trace, the (iii) status of vehicles inside shuttered service centers, and (iv) several other critical pieces of information.”
For entirely obvious reasons, wanting to run a business and, at the same time, not knowing where its assets are located prompted a sh*tload of objections (one, two, three, four, five) and creditor/landlord motions to lift the stay to move on with their lives (one, two, three, four, five).
The trustee, however, is sticking to the course already charted. In fact, at the October 3, 2025 hearing on the motion, the trustee put the full roadmap on display …
… to be followed by “value-maximizing” sales and pursuit of estate claims, and the court gave her the thumbs up through January 9, 2026.***
Which is where things stand for now, but we can’t look at the upcoming programming, especially that priming DIP, and the hot takes on X …
… and not get excited. Gonna be a raging dumpster fire, 🍿.
*The next day – September 8, 2025 – the debtors fired basically all their employees. It took plaintiffs’ lawyers eleven more to get a class action adversary complaint on file for WARN violations.
**The “Vervent Stipulation” was a mid-September ‘25 agreement between the trustee and Vervent Inc. for it to step up as an emergency servicer of loans previously administered by debtor Tricolor Auto Acceptance, LLC. The court approved it on September 19, 2025.
***Which, in fairness to the objections, is a heck of a lot shorter than the trustee’s initial ask of April 2026.
Trustee Professionals:
Legal: McDermott Will & Schulte LLP (Darren Azman, Charles “Chuck” Gibbs, Marcus Helt, Michael Wombacher) and Cavazos Hendricks Poirot, P.C. (Steven Holmes, Nicole Wood, Charles Hendricks)
Financial Advisor: CRS Capstone Partners LLC (James Calandra)
Claims Agent: Verita (Click here for free docket access)
Other Parties in Interest:
Shareholder, former CEO: Daniel Chu
Legal: McKool Smith, PC (John Sparacino)
Warehouse Lender and Administrative Agent: Fifth Third Bank, National Association
Legal: Goldberg Kohn Ltd. (Danielle Juhle, Randall Klein, Nicole Bruno) and Frost Brown Todd LLP (Rebecca Matthews)
Warehouse Lender and Administrative Agent: JPMorgan Chase Bank, N.A.
Legal: Simpson Thacher & Bartlett LLP (Elisha Graff, Nicholas Baker, Rachael Foust, Zachary Weiner) and Hunton Andrews Kurth LLP (Timothy “Tad” Davidson II, Ashley Harper)
Trustee: Wilmington Trust, National Association
Legal: Alston & Bird LLP (Gerard Catalanello, Stephen Blank, Bradley Smyer)
Creditor: Origin Bank
Legal: Katten Muchin Rosenman LLP (John Mitchell, Yelena Archiyan, Eric Hail, Ted Huffman)
Creditor: TBK Bank, SSB
Legal: Vinson & Elkins LLP (Bradley Foxman, Matthew Moran, Sara Zoglman, Paul Heath)
Creditor: ACV Capital LLC
Legal: Morgan, Lewis & Bockius LLP (Jennifer Feldsher, Edwin Smith, Jason Alderson) and Bracewell LLP (William “Trey” Wood III)
Creditor: AFCO Credit Corporation
Legal: Womble Bond Dickinson (US) LLP (Todd Atkinson, Joel Perrell, Jr.)
Loan Servicer: Vervent, Inc.
Legal: Wick Phillips Gould & Martin, LLP (Jason Rudd, Scott Lawrence)
Other Party In Interest: Cox Automotive, Inc.
Legal: Greenberg Traurig, LLP (John Elrod, Jared Weir)