PrimaLend Creditors Halt CEO's Loan Payments

Creditors of the bankrupt auto-dealership lender PrimaLend Capital Partners have secured a temporary pause on monthly loan payments flowing to an entity controlled by Chief Executive Officer Mark Jensen. US Bankruptcy Judge Mark Mullin has ordered the halt, pending a crucial decision on whether Jensen's firm, BVY Partners II, genuinely possesses a stake in some PrimaLend loans.

BVY Partners II asserts its claim to a portion of collected loan payments, citing a $34 million expenditure for participation rights. However, an official creditor committee and a group of senior noteholders are challenging BVY's assertions, labeling at least one transaction as an insider deal requiring thorough investigation. These noteholders have expressed significant apprehension regarding PrimaLend's Chapter 11 filing, under which the company faces over $286 million in debt.

PrimaLend, which filed for bankruptcy in October citing economic pressures from slowing car sales to subprime customers, has supported BVY's position. The company stated that its agreement with BVY implies BVY owns the payments, with PrimaLend acting solely as a loan servicer. A court-appointed manager is also investigating potential lawsuits against company insiders for their pre-bankruptcy management practices.