ABA Breaking Story: Nixed Tricolor IPO

ABA 10.24.25 
JPMorgan Engineered, Nixed Tricolor IPO 

A year before Tricolor Auto’s sudden implosion, JPMorgan Chase tried to take the subprime auto lender public. 

The effort began to unravel, however, when JPMorgan bankers assigned to the project discovered what one source described as financial irregularities at Tricolor while raising concerns about the prior dealings of the company’s chief financial officer. Eventually, the bank scuttled the plan in the wake of the November presidential election. 

It’s unclear if the irregularities that JPMorgan uncovered at Tricolor were related to later accusations that the Irving, Texas, company had pledged the same loans across multiple warehouse providers and securitization pools. However, they apparently didn’t affect the bank’s willingness to continue as a warehouse lender and securitization underwriter for Tricolor, as it went on to run the books on two asset-backed bond deals totaling $545.3 million that the outfit completed this March and June. 

JPMorgan recorded a third-quarter chargeoff of $170 million on its exposures to Tricolor. 

JPMorgan’s skepticism of Tricolor CFO Jerry Kollar, meanwhile, had led the bank to pressure company chief executive Daniel Chu to replace him — but to no avail, sources said. Indeed, Kollar remained on board at least through the pricing of the June securitization. 

Sources said JPMorgan’s concerns about Kollar were related in part to his association with an executive at former employer Mach Speed Holdings whom the bank discovered to have a felony conviction on his record, as well as circumstances surrounding that company’s 2015 bankruptcy. 

Kollar had joined Tricolor that year from Mach Speed, an entity that two private investment banks established to acquire interests in three manufacturers of products including tablet computers, digital-media players and remote-control cars. That Plano, Texas, operation maintained credit facilities with Comerica and Wells Fargo totaling $82 million, and obtained a contract to sell its goods at Walmart stores. 

But that program fell apart, as did one linked with the QVC television network, with sales of Mach Speed’s assets following. At the time of its bankruptcy filing, Mach Speed owed $48 million on its facility with Wells. 

The company’s bankruptcy trustee, meanwhile, hired outside counsel to investigate and subsequently filed a lawsuit against Kollar and others that the parties eventually settled. 

Like Chu, Kollar has dropped all contact with authorities or business partners since August. He did not respond to a request for comment. A JPMorgan spokesperson also declined to comment. 

The election additionally appears to have played some role in JPMorgan’s decision to drop its IPO efforts for Tricolor. That could reflect Tricolor’s focus on lending mostly to Hispanic borrowers, including undocumented immigrants, at a time when the Trump Administration has been conducting mass deportations. 

JPMorgan’s concerns about Tricolor’s finances didn’t end there. Nine months after the election, the bank summoned Chu to New York to explain further irregularities it had discovered in its role as a warehouse lender and securitization underwriter. Sources said Chu was unable to account for discrepancies between Tricolor’s audited financial statements and its actual data, and that JPMorgan quickly engineered the company’s Sept. 5 shuttering after notifying other financing partners. 

Among them was Fifth Third Bank, which like JPMorgan had supplied Tricolor with more than $200 million of warehouse financing and had underwritten its asset-backed bonds.  

Meanwhile, Tricolor’s early bankruptcy proceedings continue to yield evidence that the company was falsifying its loan information for years. The latest nugget to emerge, a source said, was that Tricolor not only was pledging the same loans across multiple facilities but that it on thousands of occasions created vehicle identification numbers for cars that didn’t exist and listed them as collateral for its warehouse lines and securitizations.  

That has added to tensions among the parties involved, including JPMorgan, Fifth Third, Tricolor’s bankruptcy trustee and its securitization trustee, Wilmington Trust.  

Wilmington, the trustee for each of Tricolor’s nine securitizations, also was responsible for flagging defective collateral in another role as loan-verification agent but never spotted the repeated or falsified VINs. Wilmington since has resigned as trustee, with sources saying the bank has zeroed in on a specific sales professional responsible for the Tricolor account for potential disciplinary action. 

The spotlight isn’t just on Wilmington. With Moody’s Ratings, S&P and KBRA having downgraded each of Tricolor’s five outstanding securitizations to junk status amid expectations that they will default, investors are clamoring for an accounting of the company’s assets and loan data.  

To that end, the bankruptcy trustee has submitted a $30 million budget request to JPMorgan, Fifth Third and other Tricolor lenders to cover needs including a forensic analysis of Tricolor’s loan portfolio, a source said. The banks have balked at that figure, however, and are considering a request to hire their own investigators.  

Servicer Vervent and Capstone Partners, which is advising the trustee, have been digging into the data but have warned it will take weeks if not months to complete the process. “There is definitely some tension building with the banks and the [bankruptcy] trustee,” a source said. “The trustee wants them to pony up, but the banks are saying, ‘What the hell, we can do it without the red tape of the trustee.’ This is going to evolve over the next week or two.” 

Government agencies including the U.S. Justice Department, FBI, SEC and U.S. Department of Homeland Security additionally have been investigating. And the Structured Finance Association has formed a task force focused on the matter.