Venture capital firm buys former Celadon leasing group at center of SEC probe
May 13, 2020
Assets from the former truck leasing and fleet management company operated by Celadon Group have been sold to a new venture capital group that plans to restructure the business for “post-pandemic success.’
H19 Capital LLC, a joint venture between Chicago-based asset management firm Hilco Global, and New York City-based Colbeck Capital Management issued a news release Tuesday announcing the acquisition of 19th Capital Group.
While the news release describes the transaction as a “multimillion dollar deal” that closed May 1, specific terms of the sale were not disclosed.
Headquartered in Indianapolis, 19th Capital Group was once a joint venture between Celadon and Element Fleet Management Corp., in 2015, when Celadon spun off its Quality Cos. truck leasing business. Celadon eventually sold its 49.99% share in 19th Capital Group to Element in late 2018.
Quality was in the center of a scheme that led to federal charges against several former Celadon executives, ultimately leading to Celadon’s bankruptcy announcement last December.
From 2016, Celadon-owned Quality Cos. owned hundreds of trucks that were overvalued on its books by tens of millions of dollars.
Quality Cos. was unable to find drivers interested in leasing certain trucks due to prior defects. Those defects had caused a significant fall in the trucks’ value. However, Celadon’s executives at the time failed to disclose the millions of dollars lost as a result of the diminished market value of these assets, the indictment alleges.
Criminal indictments and civil lawsuits followed. Federal prosecutors alleged high-ranking Celadon executives pursued a series of transactions designed to get rid of the trucks without publicly reporting the loss. The scheme involved Quality Cos. trading hundreds of its older, less desirable trucks to a dealer in exchange for the dealer’s newer, more desirable trucks. Quality Cos. then engaged in simultaneous “sales” and “purchases” of trucks with the dealer at inflated prices, which avoided disclosing the fact that the trucks were worth far less.
Celadon agreed to pay $42.2 million in restitution as part of a settlement agreement in April 2019. The Securities and Exchange Commission filed suit against Celadon’s former president, Danny Ray Williams in May 2019. On Dec. 5, 2019, the SEC filed a civil complaint against two more ex-Celadon executives – former Celadon Chief Operating Officer William Eric Meek and former Celadon Chief Financial Officer Bobby Lee Peavler – just days before the company declared Chapter 11 bankruptcy.
The news release states that some of the assets acquired in the sale include “thousands of semi-trucks and trailers, all trucking service and support machinery and equipment, all intellectual property, and a substantial portfolio of accounts receivable, including over 600 existing truck leases.”
The deal also reportedly includes taking over the lease of two truck yards and the 136,000 square-foot facility at 9702 E. 30th St. in Indianapolis, with its engine maintenance, detailing, body and paint shops with a total combined yard capacity to store over 1,700 trucks.
The release states that Hilco Global executives say they plan to continue to operate the transportation and truck leasing company, and will continue selling and servicing trucks and managing the current lease portfolio while “restructuring the operation to be more efficient as a going concern.” The news release states executives believe they will be able to save at least 55 jobs that otherwise would have been eliminated by the end of the year.
Several Hilco executives will serve in leadership roles in the new venture, including Steven Tanzi, president of Hilco Performance Solutions, who will serve as CEO.