Related Party Transactions

6 Months Ended

Jun. 30, 2024

6. Related Party Transactions

FEES AND EXPENSES

The Partnership has incurred the following related party fees and expenses:

Managerial Assistance Fee

Per the LPA and Private Placement Memorandum (the “PPM”), GPB, as General Partner, is entitled to receive an annualized managerial assistance fee (the “Managerial Assistance Fee”), for providing managerial assistance services to the Partnership. Those services include conducting the day-to-day operations of the Partnership inclusive of the identification, management and disposition of underlying portfolio assets, and other duties assumed and stated under the LPA. The Managerial Assistance Fee does not include expenses related to In-House Services and operations support services (defined below under “Partnership Expenses”) provided to the Partnership or its subsidiaries. Such expenses are in addition to, and not in lieu of, the Managerial Assistance Fee. The Managerial Assistance Fee is payable by the Partnership quarterly, in advance, at 2.0% per annum for Class A and B Units, and 1.75% per annum for Class A-1 and B-1 Units calculated on each Limited Partner’s Gross Capital Contributions. GPB, in its sole discretion, may defer, reduce or waive all or a portion of the Managerial Assistance Fee with respect to one or more Limited Partners for any period of time (and intends to waive the Managerial Assistance Fee with respect to the Special LP, as defined below, and its affiliates that invest in the Partnership).

During the three and six months ended June 30, 2024, the Partnership did not amend the Managerial Assistance Fees estimate expected to be paid during the liquidation term resulting in no change to the liability for estimated costs in excess of estimated receipts during liquidation in the Condensed Consolidated Statements of Net Assets in Liquidation. During the three and six months ended June 30, 2023, GPB increased the Managerial Assistance Fees expected to be paid during the liquidation term in light of the change in the estimated liquidation completion date to December 31, 2025, resulting in an increase to the liability for estimated costs in excess of estimated receipts during liquidation in the Condensed Consolidated Statements of Net Assets in Liquidation by nil and $3.7 million, respectively.

Managerial Assistance Fees paid during the three months ended June 30, 2024 and 2023, were $1.2 million and $2.2 million, respectively, which reduced the liability for estimated costs in excess of estimated receipts during liquidation in the Condensed Consolidated Statements of Net Assets in Liquidation by a corresponding amount. Managerial Assistance Fees paid during the six months ended June 30, 2024 and 2023, were $3.2 million and $3.7 million, respectively, which reduced the liability for estimated costs in excess of estimated receipts during liquidation in the Condensed Consolidated Statements of Net Assets in Liquidation by a corresponding amount.

Partnership Expenses

The Partnership pays its own operating expenses. GPB is responsible for its or its affiliates’ general and administrative costs and expenses and its day-to-day overhead expenses of managing the Partnership and is not entitled to be reimbursed by the Partnership for such expenses other than for the portion of the total compensation of GPB’s or its affiliates (including holding companies) officers and employees relating to the time such officers or employees provide In-House services or Operations Support Services to the Partnership or its subsidiaries. Such expenses are in addition to, and not in lieu of, the Managerial Assistance Fee. “In-House Services” include but are not limited to accounting, legal, compliance, information technology, human resources, and operational and management services to the Partnership or its subsidiaries. Operations Support Services include but are not limited to operational support and consulting services and similar services to, or in connection with, the identification, acquisition, holding and improvement of its subsidiaries. In addition, GPB, on occasion, pays Partnership expenses on the Partnership’s behalf when operationally feasible and obtains reimbursement. Upon request from GPB, the Partnership reimburses GPB, in full, for all of the expenses paid on its behalf. Partnership expenses paid during the three months ended June 30, 2024 and 2023, were $10.5 million and $3.2 million, respectively, which reduced the liability for estimated costs in excess of estimated receipts during liquidation in the Condensed Consolidated Statements of Net Assets in Liquidation by a corresponding amount. Partnership expenses paid during the six months ended June 30, 2024 and 2023, were $16.0 million and $5.9 million, respectively, which reduced the liability for estimated costs in excess of estimated receipts during liquidation in the Condensed Consolidated Statements of Net Assets in Liquidation by a corresponding amount. The Partnership expenses paid for by the Partnership to GPB are passed along to vendors that are unrelated parties which are included in general and administrative expenses - corporate in “Footnote 3. Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation”.

NOTES PAYABLE TO RELATED PARTIES

In 2017, the Partnership entered into two loan agreements with an affiliate of the Partnership, GPB Automotive Income Sub- Fund, Ltd. (“GPB AISF”), an offshore financing facility formed for the benefit of the Partnership, (“AISF Note 5 and AISF Note 6”) for a total of $11.8 million and incurred debt issuance costs of $2.0 million. In 2019, the Partnership entered into one loan agreement (“AISF Note 7”) with GPB AISF for $3.3 million and incurred debt issuance costs of $0.6 million.

Each AISF note was initially set to mature four years from the issuance date, and accrued interest at 8.75% per annum, payable monthly in arrears. In July 2021, AISF Note 5 and AISF Note 6 were amended to increase the interest rate to 12.5% and to extend the maturity date to December 2022. AISF Note 7 had an original maturity date of April 2023.

AISF Note 5, AISF Note 6, and AISF Note 7 entered into default in 2021. In August 2021, a waiver for the event of default was issued and the interest payments were deferred until December 2022 for AISF Note 5, AISF Note 6, and AISF Note 7.

Upon maturity, payments had not been made for AISF Note 5, AISF Note 6 and AISF Note 7. The timing for payment of these notes is contingent on the Partnership finalizing a plan to distribute money to its Limited Partners. The Partnership is not in a position to make distributions until the United States District Court for the Eastern District of New York (the “EDNY Court”) rules on the pending Receivership Application (as defined below) (See “Footnote 7. Commitments and Contingencies”). The Partnership is unable to provide any meaningful estimate on when the Receivership Application might be resolved. Until a ruling is made, the Partnership will continue to accrue interest on the outstanding notes each quarterly filing using management’s best estimate of six months of interest past the filing date. Accrued interest associated with the outstanding principal balance of these loans of $5.6 million was included as a component of notes payable - related party in the Condensed Consolidated Statements of Net Assets in Liquidation as of December 31, 2023. During the three and six months ending June 30, 2024, additional interest was accrued through December 2024 of $0.7 and $1.2 million, respectively, for AISF Note 5, AISF Note 6, and AIFS Note 7, as that represents the Partnership’s best estimate of the expected date of repayment, and was included as a component of notes payable - related party in the Condensed Consolidated Statements of Net Assets in Liquidation and a component of increase in notes payable - related party on the Statement of Changes in Net Assets in Liquidation. Additionally, during the three months ended June 30, 2024, the Partnership and the Directors of GPB AISF determined an additional $1.2 million should be accrued as of June 30, 2024 representing additional interest due on the historical unpaid interest, calculated by applying the contractual interest rates specified above for AISF Notes 5, 6 and 7.

Going forward, the Partnership will continue to accrue interest on the outstanding principal and unpaid interest amounts for AISF Notes 5, 6 and 7 at the contractual rates specified above.

Notes payable - related party consisted of the following:


(Dollars in thousands)				June 30,		December 31,
Note	Face Value		Maturity Date	2024		2023
AISF Note 5	$	6,556	12/31/2022¹	$	6,556	$	6,556
AISF Note 6	$	5,203	12/31/2022¹		5,203		5,203
AISF Note 7	$	3,272	4/24/2023²		3,272		3,272
Total					15,031		15,031
Add: accrued interest in liquidation					8,044		5,612
Total notes payable - related party				$	23,075	$	20,643

At December 31, 2022, these notes matured and the Partnership continues to accrue interest pursuant to the contractual terms.

At April 24, 2023, this note matured and the Partnership continues to accrue interest pursuant to the contractual terms.

OTHER RELATED PARTY TRANSACTIONS

GPB’s principals, certain other individuals and entities that have assisted and may in the future assist in our operations are and/or will be members in GPB Auto SLP, LLC, a Delaware limited liability company (the “Special LP”). The Special LP will receive a profit allocation, commonly referred to as “carried interest”, from the Partnership in accordance with the waterfall provisions in the LPA. For the three and six months ended June 30, 2024 and 2023 there have been no profit allocations allocated to the Special LP.

As compensation for the services to be rendered by Highline, the Partnership pays an operation service provider (“OSP”) fee to Highline for an annual amount agreed to by GPB and Highline, subject to the Highline Board’s approval, following Highline’s delivery of the annual written budget to GPB detailing the fees, costs and expenses that will be incurred by Highline in providing its Services. OSP fees paid for the three months ended June 30, 2024 and 2023 were nil and $0.3 million, and $0.3 million and $0.6 million for the six months ended June 30, 2024 and 2023, respectively, and reduced the liability for estimated costs in excess of estimated receipts during liquidation in the Condensed Consolidated Statements of Net Assets in Liquidation by a corresponding amount. After the OSP fee payment in January 2024, management has suspended the payment of all OSP fees from the Partnership until further notice. During the three and six months ended June 30, 2023, GPB increased the OSP fees expected to be paid during the liquidation term in light of the change in the estimated liquidation completion date to December 31, 2025, resulting in an increase to the liability for estimated costs in excess of estimated receipts during liquidation in the Condensed Consolidated Statements of Net Assets in Liquidation by $0.5 million.

Guarantees

The member of the General Partner, David Gentile, (“Gentile” or the “Member”) provided personal guarantees on certain floorplan and real estate loans prior to 2018. The initial amounts guaranteed totaled $48.7 million. Pursuant to the PPM, the Member can charge a fee to the Partnership for providing such guarantee services. The guarantee fees payable to the Member were calculated at $1.0 million based on 1.99% of the amount of the loans initially guaranteed. $1.0 million is due and payable to the Member which is reflected as a component of due to related parties in the Condensed Consolidated Statements of Net Assets in Liquidation as of June 30, 2024 and December 31, 2023. The guarantee fees were amortized over the life of the loans and were fully amortized in 2021.

- Definition

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147480990/946-20-50-2

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 5
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147480990/946-20-50-5

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147480990/946-20-50-6

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477968/946-235-50-2

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477968/946-235-50-2

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147483326/850-10-50-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.6-07(2)(g)(3))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479134/946-220-S99-1

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.6-07(2)(c))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479134/946-220-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.6-07(2)(e))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479134/946-220-S99-1

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org/850/tableOfContent

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147483326/850-10-50-6

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147483326/850-10-50-1

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147483326/850-10-50-1

+ Details

GPB Automotive Portfolio, LP 10-Q