Cardis Files Bankruptcy Petition, Lists $120-Million Debt

Cardis Corp., the West’s largest distributor of auto parts, filed a bankruptcy petition on Wednesday seeking protection from creditors and listed more than $120 million in debt.

The company was left with few choices when its largest lender, Security Pacific National Bank, declared a large loan in default last week and took control of Cardis’ primary bank account. Security Pacific, which said it is working closely with Cardis management to restructure debt, is owed $72.8 million by the Buena Park firm.

Cardis, a 5-year-old firm that grew rapidly by buying existing auto parts wholesalers, filed its petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in Los Angeles, along with three of its four subsidiaries, Motor Machine & Supply, San Diego-Pacific and Sunbelt Distributing.

According to its bankruptcy petition, the firm owes various trade vendors about $21 million and has past due loans from other banks, including one loan worth more than $30 million from Dresdner Bank, a West German institution. Cardis listed liabilities of $151.6 million and assets of $124.3 million.

Tuneup Masters, a subsidiary that is described as profitable, did not file for protection. Cardis General Counsel Charles Knight said Tuneup Masters, which Cardis purchased in September, 1986, is a separate corporation and its assets are not subject to the claims of Cardis’ creditors.

To reduce its debt, Cardis has attempted in recent months to sell Tuneup Masters, a quick-fix auto service chain with 232 outlets. Last fall, the company said it planned to sell the firm for nearly $80 million in cash to a group of four investors, including Melvin Simon, a wealthy real estate developer in Indianapolis.

“We’ve dealt with three different Cardis CEOs to close the deal, and now we’ll have a fourth player--the court. I don’t know when we might buy it,” said Benjamin Zitron, a member of the investment group.

Cardis has lost $54 million in a little more than two years. Analysts blame the slide on overambitious expansion plans.

Still, some in the industry said that if Cardis can restructure its debt, the firm’s operations can again be viable. “The pieces made money once before,” said Jay MacLaughlin, a staff member of Auto Parts Report, an industry trade magazine in Waltham, Mass. “There’s no reason to think they can’t again.”

Cardis, which employs 1,500 workers in three states, moved its corporate headquarters from Beverly Hills to Buena Park last summer. The company also operates distribution centers in Buena Park and Irvine.