Magic Ford Files for Chapter 11 Bankruptcy Protection

Magic Ford in Valencia, the second-largest Ford dealership in Southern California, has filed for Chapter 11 bankruptcy protection, listing debts of $46.4 million against $48.8 million in assets.

The dealership, ranking only behind Galpin Ford of North Hills, has been growing quickly and has a reputation for being one of the most profitable dealerships in the area.

Owned by founder Norman Gray, it has long been considered one of Santa Clarita’s leading retail businesses.

But recently, Magic Ford has been embroiled in a dispute with its secured creditor, Ford Motor Credit, a subsidiary of Ford Motor Co., according to Todd Ringwald, attorney for the dealership.

The bankruptcy petition was filed to keep Ford Motor Credit from repossessing the business, he said.

The dealership “has been tremendously successful,” Ringwald said. But “Ford took an action that caused us to file for bankruptcy.”

Ringwald declined to comment on why Magic Ford has fallen behind in paying its bills. Magic Ford controller James Perkins, however, blamed the problems on the company’s growth. Although sales have been strong, they haven’t generated enough cash to cover the costs of continued expansion, he said.

The two bankruptcy filings recorded Tuesday--one for Magic Ford and the other for its affiliate Magic Lincoln Mercury--list debts ranging from a $862,865 payment owed to the state Board of Equalization to a $75,256 payment to an auto parts supplier.

In addition, Ford Motor Credit has filed a lawsuit against the dealership in U.S. District Court in Los Angeles citing defaults of payments under its financing agreement, said Ringwald.

By filing for bankruptcy, Magic Ford has blocked the lender from seizing its assets for the time being, he added.

A spokesman for Ford Motor Credit could not be reached for comment. John Clinard, spokesman for its parent Ford Motor Co., said he didn’t know the specifics of that case, but he echoed that Magic Ford has not had problems with lagging sales. On the contrary, Ford has been pleased by the dealership’s recent performance, he said.

The dealership will remain open throughout the bankruptcy proceedings, said Ringwald. A federal Bankruptcy Court judge on Tuesday appointed Todd Neilson as trustee to oversee reorganization of the company’s debt. Neilson could not be reached for comment.

Gray started the dealership in 1978 and is sole owner of the company, according to Dun & Bradstreet, the credit rating firm.

The company had about 210 employees as of last year, Dun & Bradstreet reported.

Magic Ford’s troubles shouldn’t be taken as a sign of bad times at Valencia’s auto mall, where the dealership is the largest tenant, said Scott Young, president of neighboring Valencia Mazda.

Because of the existence of the auto mall, car sales account for about a fifth of Santa Clarita’s yearly sales tax revenue, city officials said.