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Judge torpedoes Hecker-Walser deal

Brainerd Toyota’s assets would have gone to Paul Walser, and Denny Hecker would have been paid nearly $750,000 as a consultant.

By DEE DePASS, Star Tribune

Last update: October 29, 2009 - 8:06 AM

A U.S. bankruptcy judge torpedoed the sale of Denny Hecker's Brainerd Toyota to auto dealer Paul Walser on Wednesday, saying that he didn't have enough information to go on and scolding the two parties for negotiating a deal without the immediate involvement of bankruptcy trustee Randy Seaver.

The sale would have awarded Hecker nearly $750,000 in fees, of which about $300,000 would have gone to the trustee to pay creditors, $40,000 to pay for Hecker's back taxes and $60,000 to pay Hecker's new attorney, Bill Skolnick. Chief creditor Chrysler Financial, which is owed $466 million, objected to the deal, saying it was entitled to more money from any sale.

In rejecting the sales agreement, Judge Robert Kressel questioned the dealership's ownership, how Hecker was able to negotiate such a deal when his assets were tied up in bankruptcy court and why the trustee wasn't involved in all negotiations from the onset. Kressel also questioned why Walser would need Hecker as a consultant, given Walser's success in the auto business.

The original purchase price, for car inventory, parts, intangibles and other non-real-estate assets was nearly $3 million and was negotiated between Hecker and current Twin Cities auto giant Paul Walser on Sept. 14. The trustee's involvement came later, when he tried to salvage something for creditors.

If the sale had been permitted, it would have given Walser a highly coveted Toyota franchise and solved the fate of the last of the 26 auto dealerships that Hecker once owned. Hecker filed for bankruptcy in June and had closed or sold 25 other auto stores over the past year in addition to rental, lease and fleet auto companies.

Toyota had been running the Brainerd dealership for months after Hecker defaulted on loans. However, Toyota closed that store last month and set an Oct. 31 deadline for a sale. With the Walser deal rejected, it is unclear what the next step might be.

In a phone interview after the deal was rejected, Walser said he still wants the dealership, but said that it will be up to Toyota to decide what it would do. Toyota officials could not be reached.

"We invested a lot of time and effort to put this together. The easiest course of action is to have these parties [the judge, trustee and Hecker] figure out how they want the money allocated," Walser said. "It's a great franchise and we were truly excited about it. I still hope the whole thing has a good ending."

Walser said he and a longtime-employee-turned-partner had planned to reopen the Toyota store with 30 employees, most of whom previously worked there. But without a decision from Toyota and without court approval, laid off employees will continue to be on unemployment, Walser said.

In court on Wednesday, Matthew Burton, an attorney for bankruptcy trustee Seaver, acknowledged that the original sales deal struck between Hecker and Walser was not ideal. But "without an accord, there will be no money for the estate or the debtor as Toyota Motor Sales USA Inc. has this dealership on life support. If this settlement is not approved, there will no longer be a dealership to sell," Burton said in court documents.

Ultimately, Toyota could decide to simply award the franchise rights for the dealership to Walser or anyone else, but such a remedy would do little for Hecker's creditors, who are collectively owed $767 million.

In a separate action on Wednesday, Kressel approved the sale of Hecker's stake in Transcend Communications Inc. to Fastech Acquisition for at least $600,000. The money, which largely represented loans Hecker made to Transcend, will be turned over to the trustee so it can be used to pay Hecker's creditors.

Dee DePass • 612-673-7725

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