Case Summary: Cobra Tire & Auto Service Chapter 11

Business Description

Headquartered in Phoenix, Cobra Tire and Auto Service ("Cobra" or the "Debtor") operates as an automotive repair and tire service provider serving Maricopa County, Arizona. The Company maintains service locations in Phoenix and Gilbert, Arizona, catering to a customer base that includes retail clients, fleet operators, and mining customers.

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Corporate History

Cobra was formed as an Arizona limited liability company in 2018, though its operational roots extend significantly deeper into the region's automotive industry.

• The Fletcher family, which controls the Debtor, has been involved in the Arizona automotive repair sector for approximately 55 years.
• Over this five-decade span, the family has operated under various entities, including Fletcher's Tire and Auto Service and, most recently, Cobra Tire and Auto Service.

Historically, the Company has been a profitable enterprise. Prior to 2024, Cobra operated two primary locations: one in central Phoenix and one in Gilbert, Arizona.

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Operations Overview

As of the Petition Date, Cobra employs 32 individuals. The workforce is paid weekly based on the previous week's pay period.

Management

• President: The Company is led by its President, Gerald Fletcher, an insider who oversees operations and receives an estimated salary of $800 per week.
• Vice President: Lisa Jordan, the spouse of the President, serves as Vice President overseeing personnel and payroll, also receiving an estimated salary of $800 per week.

Financial Metrics

• Cash Position: As of the Petition Date, the Debtor holds approximately $10,000 in cash.
• Accounts Receivable: The Debtor estimates its accounts receivable at approximately $61,444.

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Prepetition Obligations

Secured Indebtedness

The Debtor asserts that there is no equity in any purported secured loan beyond the specific obligations listed below. The primary secured debts include:

• Alliance Bank: Approximately $680,000.
• Pathward: Approximately $976,000 related to equipment loans.
• North Mill Equipment Finance: Approximately $680,000 related to equipment loans.

Merchant Cash Advances (MCAs) and Factoring

In 2025, the Debtor incurred more than 17 merchant cash advance or factoring loans, primarily to service existing debt obligations. The Debtor highlights significant issues regarding the validity and perfection of liens associated with these facilities:

• Outstanding Balance: Cobra has approximately $3 million recorded on its books as owed to these lenders, though the Debtor estimates that less than $2 million was actually advanced.
• Lien Disputes: The Debtor asserts that all purported blanket liens or interests in cash or receivables held by these lenders (other than Alliance Bank) are unsecured as of the Petition Date.
  • The Debtor notes that it is difficult to determine which factoring lenders perfected their interests, as most filed UCC-1 financing statements do not identify the specific lender.

Other Obligations

• Wages: Prepetition wages for current pay periods are estimated at approximately $28,905.

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Events Leading to Bankruptcy

Failed Expansion and Revenue Shortfalls

The Debtor’s financial distress began in the spring of 2024, driven by an anticipated significant increase in business volume from its largest customer, specifically related to contracts for Amazon’s delivery fleet.

• To accommodate this projected demand, Cobra expanded its footprint by opening two additional facilities in 2024, known as the "University" and "Gibson" locations.
• The Company borrowed approximately $1.5 million to fund equipment and installation for the build-out of these new sites.
• However, only approximately 25% of the anticipated business volume materialized. This shortfall resulted in monthly operating losses of approximately $250,000.

Liquidity Crisis and Debt Spiral

Expecting the revenue shortfall to be temporary, Cobra sought to bridge its liquidity gap through high-interest financing.

• From early 2025 through the summer of 2025, the Company obtained working capital via numerous MCA and factoring loans.
• The cost of servicing these loans escalated to as much as $200,000 per month.
• Operational strain deepened as the Company’s primary parts supplier, NAPA, placed Cobra on cash-on-delivery (COD) terms in May 2025 due to payment difficulties.

Physical Asset Damage

Compounding the financial crisis, significant rainstorms in September 2025 caused the roof of the newly added University facility to collapse, resulting in flooding of the office area. Consequently, Cobra was forced to cease operations at that location.

Chapter 11 Filing and Post-Petition Financing

Facing a projected operating shortfall of approximately $11,750 for December 2025 and the likelihood of further vendor tightening, Cobra filed for Chapter 11 protection to stabilize operations.

• DIP Financing: To fund the case and bridge the period until profitable operations can resume in early 2026, the Debtor has been offered $75,000 in post-petition financing from insiders Gerald Fletcher and Lisa Jordan.
  • The financing is non-interest bearing and is subject to the lenders receiving an unsecured administrative expense claim.
  • Proceeds will be used for ordinary course expenses, utility deposits, and COD payments.