Forbes: Medallion Financial Becomes House Of Cards As Ride-Hailing Apps Hammer Yellow Taxi Market

By Alexander Gladstone
Debtwire  CONTRIBUTOR
Forbes
January 3, 2016

Alexander Gladstone is a Debtwire reporter covering distressed debt. He can be reached at Alexander.Gladstone@debtwire.com and on Twitter at @gladstonea.

http://www.forbes.com/sites/debtwire/2017/01/03/medallion-financial-becomes-house-of-cards-as-ride-hailing-apps-hammer-yellow-taxi-market/#61fa5d947081

The competitive damage that ride-hailing apps such as Uber and Lyft have inflicted on the legacy taxicab business now threatens to topple Medallion Financial, a complex entity heavily exposed to taxi medallion financing, four sources following the company told Debtwire.

Medallion Financial, controlled by the Murstein family of New York, traces its roots to 1937 when the family patriarch, Polish immigrant Leon Murstein, bought a taxi medallion for ten dollars in order to start driving his own cab. Murstein and his family members went on to acquire hundreds more taxi medallions, and in 1979 they founded Medallion Financial to offer lending for medallion purchases in major US cities. Medallion Financial is now the parent of an intricate web of 15 separate subsidiaries, including a professional lacrosse team, the New York Lizards, a NASCAR race team, Richard Petty Motorsports, and a fine art financing company.

New York City requires that all metered taxis, the iconic yellow cabs, display a medallion. As recently as 2014, an individual medallion in New York was worth approximately $1 million. However, as Uber and Lyft gobbled up market share in the past two years at the expense of the traditional yellow cabs, the market price of taxi medallions plummeted to an average of roughly $500,000 by this November, according to data from the New York Taxi & Limousine Commission. Other markets that Medallion Financial operates in, such as Chicago, Boston, and Newark, have seen similar, if not steeper, declines.

Not surprisingly, this has led to a dramatic spike in defaults within Medallion’s loan portfolio. At September 30, the company classified $58.3 million of medallion loans as delinquent, amounting to 15.2% of the total portfolio, up from $5.5 million of delinquencies a year ago, representing just 1.4% of the total portfolio, securities filings show.

“I would say that they are near a tipping point,” one of the sources said.

yellow_cabs

 Due to the market pressure, Medallion Financial is no longer able to receive dividends from its Utah-based subsidiary, Medallion Bank, which used to be the company’s golden goose. In fact, after receiving a dividend of $3 million for the first half of 2016, Medallion had to pay the entirety of the dividend back to the bank in order to avert violating a minimum 15% capital ratio requirement imposed by the FDIC.

In August, another one of Medallion’s subsidiaries, Medallion Funding Inc. was forced to provide additional collateral to its lender Sterling Bank in exchange for a maturity extension. To satisfy the demands, Medallion transferred two oil paintings from its fine art financing company, collectively worth $3 million.

But those maneuvers could be for naught, considering that Medallion is already openly in default. On October 24, Metropolitan Commercial Bank, the lender to Medallion Funding Chicago Corp, filed suit against the company in the New York Supreme Court for failing to repay $8.8 million of loans that came due on October 17, according to court filings. The hearing is set for January 25.

If Medallion receives a judgment in the MetBank suit, it could trigger a cross-default in other loan agreements across the corporate family. However, even should Medallion receive a favorable ruling, it is still running out of liquidity as another wave of maturities approaches, including $64 million of bank note maturities over the next twelve months, as well as a $108 million due to its largest lender DZ Bank on May 2017. Across its various entities, Medallion had only $24.7 million of cash and cash equivalents as of September 30.

 

 

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