The future of an internationally renowned East Valley racing school with a multi-million-dollar-a-year operation may rest in the hands of a Scottsdale businessman who specializes in saving companies from financial ruin.
Timothy Shaffer and his company, Clotho Corporate Recovery, won a federal judge’s tentative approval last month to help rescue the 50-year-old Bob Bondurant School of High Performance Driving near Chandler from $3.5 million in debt.
The school earlier in November asked bankruptcy court for permission to hire Shaffer to rescue it from a sea of red ink that the owners Bob and Patricia Bondurant of Paradise Valley blame largely on the loss of a lucrative military training contract, sporadic payments from two struggling auto manufacturers and the loss of a line of popular racing cars.
Located at Wild Horse Pass near Chandler, the school has been both a fun mecca for nearly 500,000 students – who range from go-kart and amateur racing enthusiasts to teens just beginning to learn how to drive to military and law enforcement personnel.
Shaffer was appointed chief restructuring officer for the debt-beleaguered school and will oversee management and oversight of its operations, although U.S. Bankruptcy Judge Brenda Martinset a final hearing on his appointment for Dec. 11 after the attorney for one creditor sought more time to examine his qualifications, specific duties and rate of pay.
A spokesman for Shaffer issued a press release last week, stating:
“Among his other responsibilities, Shaffer will negotiate with third parties in connection with investment and/or acquisition of the school, formulate a reorganization plan, collect and administer assets and liabilities of the school, and prepare monthly operating reports.”
The Bondurants filed for bankruptcy protection in early October.
“Both national and international students attend the Bondurant School on a regular basis and learn competition driving, police pursuit driving, evasive driving, and stunt driving, among other types of high-performance driving and racing,” the school said in bankruptcy filings, noting it also taught “recreational high-performance driving to individuals and corporate groups.”
Robert L. Bondurant, a world champion racer, founded the school in 1968 in Orange County, California, after a near-death accident at Watkins Glen, New York, when a steering arm on his McLaren MARK II CanAm snapped at 150 mph.
Before relocating to the East Valley in 1990, his students included the late actors and racing enthusiasts Jim Garner and Paul Newman – drawn partly by Bondurant’s own successful racing career.
He was named in 1959 Corvette Driver of the Year. In 1964, he and friend Dan Gurney won the GT Class at Le Mans in France and a year later won seven of his 10 races in Shelby Cobras and Daytonas to deliver to Ford and Shelby American the World Manufacturer’s Championship for Fédération Internationale de l’Automobile (FIA), the international governing body of motorsport. He and Gurney comprise the only American team to win that title.
Billing itself as the “largest purpose-built driving school in the world,” the school sports two training tracks – a 15-turn, 1.6-mile road course and a nine- turn, 1.2-mile road course – as well as an eight-acre asphalt skills pad.
Shaffer, who would earn a $20,000 retainer be paid $350 an hour, is a “certified turnaround professional and certified insolvency and restructuring advisor” with 26 years of experience helping distressed middle-market companies, according to court filings.
During his career Shaffer has managed complex chapter 11 cases on behalf of debtors and creditors throughout the nation. He has served in corporate restructuring, private equity, consulting, and executive management roles, as well as the CRO and financial advisor for numerous companies.
“Pat and Bob Bondurant are equally committed to helping the School get back on track,” said Shaffer through a spokesman. “We’ve already begun working on restructuring initiatives that will help stabilize the school’s financial position.
“Our collective goal is to return the company to normal operations and ensure the School is a part of our local and national racing communities for many years to come. We’re especially looking forward to hosting the 2018 Road to Indy $200,000 Scholarship Shootout, which will be held at our school in December,” he added.
In appointing Shaffer on an interim basis pending the Dec. 11 hearing, the judge overruled objections by attorney Thomas Little.
Little asked for more detail about Shaffer’s experience in handling the finances of a company like the racing school and his specific duties and powers while managing it.
Little also told the judge that “current management does not have a good relationship with the employees and believes that the poor relationship will impair management’s ability to continue the business operations because persons with the knowledge of this industry and this specialized business would not come back to work for the debtor under these circumstances.”
The school’s bankruptcy petition claims an inventory “primarily consists of Dodge Challengers, Chargers, Fiat 124, Fiat 500 and Open-Wheel Formula Mazda race cars,” and its list of assets shows 18 Formula Mazdas – mostly dating back to the 1990s and early 2000s – a 1965 Shelby Cobra and a half-dozen go-karts.
In its Chapter 11 filing, the school lists $2.69 million in secured debts and $766,000 in unsecured debts against $619,000 in assets.
Among those asserts are $263,000 in shop equipment, $375,000 in cash, $87,000 in receivables and $137,000 in parts. There was no estimate on the value of the vehicles.
The school leases the track and fixtures, which are valued at $2.7 million, according to the filings.
The school on Oct. 3 announced on its website that it had filed for bankruptcy protection, vowing to “continue operating and serving our students and corporate groups as usual while we develop new business relationships to ensure the vitality of the company in the future.
“For over 50 years, Bob Bondurant School of High Performance Driving has been a fixture in Arizona and renowned nationally and internationally in the world of racing, thanks to our loyal students, dedicated employees and the Gila River Indian Community,” it continued, adding that its Chapter 11 filing would give it “sufficient time to reorganize and position the company for sustained success.”
“Our plan is to emerge from this process as a stronger company and continue to drive this company into the next 50 years,” it added.
Over the years, the school’s reputation has attracted sponsorships and partnerships from some of the biggest names in the automotive industry, including Fiat, Dodge SRT, Goodyear, Shell and Pennzoil.
In detailing the four factors that forced the bankruptcy action, Bondurant’s wife Patricia signed an affidavit stating that the “first and primary” reason was the school’s inability to pay its September rent.
“The Bondurant School was concerned that its landlord, Sun Valley Marina Development Corporation, a tribal corporation chartered by the Gila River Indian Community, potentially could have exercised its lease rights and locked the Bondurant School out, which would have disrupted its ongoing operations,” attorneys told the court.
However, they added that since the filing, Bondurant has been in discussions with Sun Valley and the Gila Community and that they are “supportive of the Bondurant.”
Bondurant also lost “a substantial contract with the U.S. Government to train military personnel how to drive quickly and safely in emergency situations,” bankruptcy filings state, causing “a decrease of substantial and once-consistent revenue.”
While the school doesn’t put a value on that contract other financial records filed with the court show that Bondurant’s annual revenue of $6.9 million in each of the last two years appears like to drop this year. It reported that revenue for the first nine months of 2018 amount to $4.72 million.
More detailed records filed with the court showed that between the second week of October and the first week of November, the school reported total revenue ranging between $72,000 and $108,000. But when its weekly expenses were included, it was running a weekly deficit ranging between $5,958 and $52,845.
Adding to the school’s financial woes were Dodge and Fiat as well, according to court papers,
“As car manufacturers have struggled over the recent years, regular payments from the Bondurant School’s two primary sponsors, Dodge and Fiat, became inconsistent and disrupted Bondurant School’s ability to remain current with its own vendors,” lawyers told the court.
To make matters worse Dodge took back all its Vipers “for safety and regulatory reasons,” costing Bondurant a “subset of the customer base” that liked driving its “halo” racing car. The school is negotiating with Fiat Chrysler of America for a new “halo” car – a reference to the titanium structure above the cockpit that protects drivers from flying debris.
Bondurant also told the court it is in secret negotiations with a potential investor who was being “frustrated” by unnamed issues.
The school said it needed bankruptcy protection “to court additional suitors/investors and to operate without interruption while the investor works out certain issues currently frustrating the transaction.”
Despite all this, Bondurant also told the court it will “continue to build upon its current and new business relationships in an effort to continue educating its students on how to safely drive high performance vehicles.”