Carsharing service HyreCar Inc. has announced that it voluntarily initiated a Chapter 11 proceeding in the U.S. Bankruptcy Court for the District of Delaware, according to a news release.
The company has filed various “first day” motions requesting customary relief that will enable it to transition into Chapter 11 without material disruption to its ordinary course operations, including payment of employee wages and benefits.
HyreCar has also entered into an agreement with Holmes Motors Inc. to provide $5 million in debtor-in-possession (DIP) financing. Approval of the DIP financing is part of the first-day motions filed with the bankruptcy court.
Prior to the Chapter 11 filing, HyreCar entered a term sheet with Holmes to acquire substantially the assets of the company for $7.75 million, subject to review by Holmes and the bankruptcy court approval. Holmes will be entitled to “credit bid” the DIP financing against the purchase price. The transaction is part of a sale process under Section 363 of the Bankruptcy Code that will be subject to compliance with agreed upon and bankruptcy court-approved bidding procedures, allowing for the submission of higher or otherwise better offers.
In accordance with the sale process under Section 363 of the Bankruptcy Code, notice of the proposed sale to Holmes will be given to third parties and competing bids will be solicited.
Third parties will have the opportunity to bid on the assets. An initial competing bid must meet certain conditions and exceed the stipulated value of Holmes’s bid of $7.75 million by at least $457,500. The bidding process is designed to achieve the highest and best offer for the company’s assets.
Zukin Partners will assist HyreCar in evaluating any bids received, in consultation with the company and its other advisors and as overseen by the court.
“We believe that a robust sale process will expedite the Chapter 11 proceedings and allow the company to execute on management’s clear vision and plan for HyreCar’s future,” said Jim Zukin, founder and managing partner of Zukin Partners, in a news release.
HyreCar also announced that its board of directors appointed Eduardo Iniguez as CEO and chief financial officer. AJ Lee, former senior vice president of growth, has been appointed as chief operating officer. Iniguez and Lee have been leading the company’s restructuring efforts and are expected to continue doing so in their new roles.