Wednesday, September 20, 2017

What's a taxi medallion worth these days?



Crain’s New York recently reported that based upon a bankruptcy filing by a company (Hypnotic Taxi LLC) owned by Evgeny “Gene” Friedman, an auction held September 18th, 2017  the answer is about $186,000 .  Maltz Auctions was the auctioneer, at the LaGuardia Marriott Hotel, of 46 medallions that were assets of the bankruptcy estate in In re Hypnotic Taxi LLC.  This case involved medallion owner Evgeny “Gene” Friedman, who once owned 800 medallions, resulting from a foreclosure by Citibank and tax fraud charges.

With the 6% buyer premium owed to Maltz, the purchase price was about $198,000 per medallion or $9.1M in total for all 46 medallions.

According to Crain’s New York, the winning bidder was out of state hedge fund MGPE, Inc.  A hearing to confirm the results of the sale will be held in the U.S. Bankruptcy Court for the Eastern District of New York on September 25th.  Accordingly, based on the auction results for the 46 medallions at the Maltz auction, the value of medallions appears to be $198,000. The banks that have financed NYC medallions may argue that one auction (albeit of 46 medallions) is not the indicator of true value, others may argue that yesterday’s auction results are a true indicator of medallion value. Jim Shenwick.

Tuesday, September 19, 2017

Taxi Medallion Litigation-An Update



Here at Shenwick & Associates, we are continuing to monitor litigation regarding the taxi medallion industry.  Earlier this year, the Taxi Medallion Owner Driver Association (TMODA) along with credit unions that invested in taxi medallions and other plaintiffs commenced an action in the U.S. District Court for the Southern District of New York (federal court) against New York City and the Taxi and Limousine Commission (TLC), claiming that the TLC’s rules deny taxi drivers equal protection and due process because Uber and Lyft drivers aren’t required to comply with the same TLC regulations as medallion owners.  That action was dismissed in March, finding that the difference between taxis and alternative services justified the differences in the rules.  That case has been appealed to the Second Circuit Court of Appeals and scheduled for argument on October 24th, 2017.

In April, the TMODA sent a letter to Governor Cuomo asking for a moratorium on medallion foreclosures.  In May, the TMODA filed an Article 78 proceeding in New York County Supreme Court (which included two taxi drivers as coplaintiffs), seeking to compel the TLC “to establish and enforce standards to ensure . . . yellow medallion taxicabs, are and remain financially stable.”  A hearing in that special proceeding will be held on October 24th, 2017.

We will continue to monitor taxi medallion litigation and provide readers of our e-mails and blog with updates.  If you have an underwater medallion or other debtor and creditor and bankruptcy questions, please contact Jim Shenwick.

Wednesday, September 13, 2017

New York Times: Taxi Medallions, Once a Safe Investment, Now Drag Owners Into Debt

By WINNIE HU

Owning a yellow cab has left Issa Isac in deep debt and facing a precarious future.
It was not supposed to turn out this way when Mr. Isac slid behind the wheel in
2005. Soon he was earning $200 a night driving. Three years later, he borrowed
$335,000 to buy a New York City taxi medallion, which gave him the right to operate
his own cab.

But now Mr. Isac earns half of what he did when he started, as riders have
defected to Uber and other competitors. He stopped making the $2,700-a-month
loan payment on his medallion in February because he was broke. Last month, it was
sold to help pay his debts.

“I see my future crashing down,” said Mr. Isac, 46, an immigrant from Burkina
Faso. “I worry every day. Sometimes, I can’t sleep thinking about it. Everything
changed overnight.”

Taxi ownership once seemed a guaranteed route to financial security, something
that was more tangible and reliable than the stock market since people hailed cabs in in good times and bad. Generations of new immigrants toiled away for years to earn enough to buy a coveted medallion. Those who had them took pride in them, and viewed them as their retirement fund.

Uber and other ride-hail apps have upended all that.

Just as homeowners faced ruin when housing markets sank, struggling cab
owners in Chicago, Boston, San Francisco and other cities are now facing foreclosure
and bankruptcy. Many took out loans to pay for taxi medallions, counting on
business that has instead nose-dived amid fierce competition. They are falling
behind on loan payments, being turned away by lenders and stand to lose not only
the medallions that are their livelihoods but also their homes and savings.

Nowhere is the crisis more dire than in New York, which has the largest taxi fleet in
the country. Medallions now sell for a fraction of the record $1.3 million price in
2014, and in many cases, are worth far less than what their owners borrowed to buy
them. Even if these owners sell their medallions, they still owe hundreds of
thousands of dollars — far more than in many other cities where medallion prices
were lower to begin with.

In an unprecedented fire sale of medallions, up to 46 of them are expected to go
on the auction block later this month as part of bankruptcy proceedings against taxi
companies affiliated with an embattled taxi mogul. While the city has previously held
auctions to sell a limited number of new medallions — about 1,800 since 1996 — this
is believed to be the first auction to dispose of foreclosed medallions, according to
city officials.

While the auction has drawn attention to the precipitous fall of the once-mighty
taxi industry, it does not reflect the hardship — and heartbreak — of individual
owners like Mr. Isac. It is their stories that often get lost in the larger debate over
new technology and commutes, and tell of the human cost of the city’s rapidly
evolving transportation landscape.

Since 2015, a total of 85 medallions have been sold as part of foreclosure
proceedings, according to city records. In August alone, 12 of the 21 medallion sales
were part of foreclosures; the prices of all the sales ranged from $150,000 to $450,000 per medallion.

Many more taxi owners say they do not know how much longer they can hold
on. Didar Singh, 65, who took out a loan to buy two medallions for a total of $2.6
million in 2013, said he can only afford to pay the interest — $4,816 a month — on
the loan. As it is, his taxis do not bring in enough to cover his expenses, forcing him
to rely on savings and help from his children.

Sohan Gill once saw his medallion as such a good investment — ”better than a
house” — that his wife bought two more in 2001. Now they cannot find enough
drivers for the cabs because business is so bad. And Mr. Gill, 63, who had retired
from driving, had to go back on the road. “How many more years am I going to drive
to take care of these medallions?” he asked.

Gone are the years when taxi medallions steadily rose in value, largely because
there was a limited supply of them. The city controls the number of medallions —
currently capped at 13,587 — to prevent an oversupply of cabs like what occurred in
the 1930s when concerns over congestion, reckless driving and cut-rate fares
prompted the city to step in. The last time there was an auction for medallions was
when the city sold 350 new medallions in 2014 at the height of the market,
generating $359 million in revenue.

But today, yellow cabs are dwarfed by cars working for ride-hail apps, which
face far fewer regulations. Taxi owners and their supporters complain that their
competitors do not have a similar cap on their cars, and are not subject to strict rules
on taxis that cover fares, vehicle equipment and access for disabled people, among
other things.

There are more than 63,000 black cars providing rides in the city through five
major app services: Uber, Lyft, Via, Gett and Juno. Of those, about 61,000 cars are
connected with Uber, though they may also work for the other app services, too.

“We are not against competition, we are not against technology, but we want to
compete fair and square,” said Nino Hervias, 58, a taxi owner and spokesman for the
Taxi Medallion Owner Driver Association, which represents about 1,500 individual
taxi owners, most of whom are immigrants.

Taxi owners have sought to sue the city over what they see as an unfair playing field, with little success. Earlier this year, a lawsuit filed against the city and taxi
commission by taxi owners, trade groups and credit unions was dismissed by a
federal judge who found that they had failed to show they were denied due process
or equal protection.

Mr. Hervias and another driver have also taken legal action, known as an Article
78 proceeding, to compel the city and its regulators to establish and enforce
standards that will make sure that all licensed cars — including yellow cabs — “are
and remain financially stable.” The case is pending in State Supreme Court in
Manhattan, with a court appearance scheduled in October.

Yellow taxis made an average of 277,042 daily trips and collected $4 million in
fares per day in July, down from 332,231 daily trips and $4.9 million in fares the
year before, according to city data.

Allan J. Fromberg, a spokesman for the taxi commission, said it had taken a
number of steps to help struggling taxi owners, such as lifting a requirement for
individual owners to personally drive their taxis at least 150 shifts a year, which was
not only a burden for older people but also limited the pool of potential buyers for
medallions. It has also supported laws that have eased restrictions on who could buy
the medallions and significantly lowered the transfer tax on medallion sales.

The commission has also provided financial incentives to defray the cost and
maintenance of handicap-accessible cars, Mr. Fromberg said. And it has created a
pilot program that is intended to help fleet owners attract more drivers; the program
allows drivers to pay a percentage of their earnings during a shift to lease the cab, in
lieu of a flat fee up front that puts drivers under pressure and leaves them in the hole
if they do not earn enough back.

But for many taxi owners, such measures have not been enough.

Mr. Isac is again leasing yellow cabs since he no longer has his own medallion.

At times, he picks up only one passenger an hour. Even so, he is not ready to give up
on yellow cabs yet.

“I’m still driving a yellow taxi because I want them to come back,” he said. “I don’t want to see yellow cars disappear from the streets.”

Uppkar Thind, 46, an immigrant from India, said he now has to drive 11 to 13
hours a day and can no longer take time off if he wants to break even. He is paying
off a medallion that he bought for $357,000 in 2006 with money borrowed from his
relatives and a credit union.

“I worked hard,’’ he said. “I achieved my American dream and it turned into a
nightmare.”

Copyright 2017 The New York Times Company.  All rights reserved.

Thursday, August 31, 2017

Taxi medallions lenders enter conservatorship


Here at Shenwick & Associates, we’ve been paying close attention to developments concerning the plummeting values of New York City taxicab medallions.  A client we’ve been working with sent us this AP story last month that describes how the taxicab medallion crash isn’t just affecting owners of medallions and cab drivers, but has spread to lending companies.

According to the article, three credit unions that specialized in loans collateralized by taxicab medallions have been placed into conservatorship with the National Credit Union Administration (NCUA), including LOMTO Federal Credit Union and Melrose Credit Union .  The article also alleges that the NCUA is aggressively attempting to collect from borrowers, even those who are current on their loan payments, by demanding payment of the loan in full and threatening foreclosure on the assets pledged as collateral against the loan (which may include not just the medallion, but also motor vehicles and real estate).

In a April 2014 supervisory letter regarding taxi medallion lending , the NCUA advised field staff to “[c]onfirm that a credit union that places more emphasis on the collateral value than on standard cash flow qualifications supports the market premium with other committed sources of repayment to the loan and additional collateral.”  Based on this guidance, we can expect that that the management teams hired by the NCUA to administer these credit unions will demand additional collateral to further secure these loans, and if they’re unsuccessful, to commence foreclosure actions against the current collateral.

As we’ve detailed in our initial e-mail on the topic , there are many possible options to consider to address “underwater” taxi medallions, including a workout and several bankruptcy scenarios, but a detailed financial analysis is necessary.  Our firm specializes in debtor/creditor relations and bankruptcy, so if you need help with your taxi medallion debt, please contact Jim Shenwick.