Ugly Duckling Corp. Announces Approval
2 July 1998
Ugly Duckling Corp. Announces Approval and Confirmation of Reliance Acceptance Group Inc.'s Bankruptcy Plan
PHOENIX--July 2, 1998--Ugly Duckling Corp. Thursday announced that the Fourth Amended Joint Plan of Reorganization under Chapter 11 of the Federal Bankruptcy Code of Reliance Acceptance Group Inc. and its subsidiaries was approved as of June 30, 1998 by those entitled to vote under the plan.The plan, along with certain technical amendments, was also approved that same day by the United States Bankruptcy Court for the District of Delaware. Thursday, the plan was confirmed by entry of the Court's order approving said plan. The plan's scheduled effective date for the reorganization is July 31, 1998.
As previously announced, in February 1998, Ugly Duckling entered into an agreement to service Reliance's receivables portfolio, which agreement was approved, as amended, by the Court on June 30, 1998, effective upon entry of the plan confirmation order. Ugly Duckling will begin servicing under this agreement beginning August 1, 1998, after the plan effective date occurs.
The servicing agreement provides for, among other things, Reliance to pay Ugly Duckling a base percentage servicing fee of 4 percent per annum (or if greater, $15 per receivable per month) and incentive fees (subject to certain adjustments, payment priorities and conditions), and Reliance to reimburse Ugly Duckling for certain costs and expenses.
The provision of the servicing agreement pertaining to incentive fees was amended as part of the plan confirmation hearing on June 30. The servicing agreement, as amended, continues to provide for the payment to Ugly Duckling of a $1.3 million cash incentive fee subject to and upon the effective date of the plan.
There can be no assurance that the Reliance Plan will become effective, or if it becomes effective, that Ugly Duckling will actually be paid any incentive fees, including the $1.3 million fee. In addition, concerning the June 30 hearing, Reliance, its bank group, the Reliance creditors' committee, and Ugly Duckling agreed to address certain post-confirmation transition matters affecting the Reliance estate and Ugly Duckling.
With headquarters in Phoenix, Ugly Duckling is a used car sales and finance company that operates the nation's largest chain of used car dealerships focused exclusively on the sub-prime market. The corporation underwrites, finances and services sub-prime contracts generated at its 50 Ugly Duckling dealerships, and provides operating lines of credit and other financing arrangements for non-affiliated used car dealers.
The corporation also acquires economic interests in distressed portfolios.
This news release includes statements that may constitute forward-looking statements, usually containing the words "believe," "estimate," "project," "expects" or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. By making these forward-looking statements, the corporation undertakes no obligation to update these statements for revisions or changes after the date of this release. Factors that would cause or contribute to such differences include, but are not limited to, factors detailed in the sections and subsections titled "Risk Factors," "Factors That May Affect Future Results and Financial Condition" and "Factors That May Affect Future Stock Performance" in Ugly Duckling's most recent reports on Form 10-K and Form 10-Q, and elsewhere in the corporation's Securities and Exchange Commission filings.