Of course it’s Uber’s fault. One of the behind-the-scenes barons of the NYC taxi industry can’t pay his bills, and he’s asked the judge to keep the banks from taking his collateral. An eye-popping 900 medallions.
While the value of medallions has been dropping, they’re still worth a lot of money (the article quotes a price of $800K a piece). Assuming Friedman’s “control” of the medallions doesn’t mean 100% ownership (I’d guess he has backers), he still probably owns a big piece of a $700MM business.
He owes a lot of money to Citibank and hasn’t paid them, so they defaulted him and moved to take possession of some of the medallions. I’ve heard rumors that there’s been a bunch of negotiating going on behind the scenes to find a resolution, but it came to a head in court earlier this week.
The judge gave him a bit of time, because of the Uber influence:
He gave Friedman a month to settle his $31.5 million debt to Citibank — and warned that at the next court hearing on April 30, he may “ultimately grant the seizure request.” Oing held off on seizure, in a nod to the changing industry, saying “time is money” because “medallions are worth a lot of money, so far, until … Uber.”
Friedman has claimed he can’t pay back the loans because the bank tightened up its lending practices at a time when he’s been hit hard by the e-hailing app.
It’s an amusing enough defense, but I’m actually kind of surprised the judge gave him another 30 days to figure it out.
This sort of mass disruption of the yellow cabs in NYC is bound to have the small group of folks who control it more nervous than a cat in a room of rocking chairs.
If I were Uber, I think I would quietly try to negotiate with Friedman to provide the capital to prop him up for 30 days, if only to have some insight into the inner beast of a generations old boys club.
Additionally, if I were Uber, I’d call Citibank now and be in position to make the highest offer to Citibank to buy the medallions from them. Given how much flack Uber gets from traditional transportation options like taxi companies and government agencies, it might seem odd for them to step in and prop up the market. But, it could be a fascinating opportunity to give them leverage. Instead of Citibank selling off the medallions and driving down the price of the market, Uber could hold them and decide if they wanted to sell them for a loss at any point to cause market disruption or use the position for other purposes. And, it’s entirely possible that Uber doesn’t want mass disruption in the NYC market right now.
At any rate, it’s an interesting situation for an asset class shrouded in secrecy.
One thing is pretty clear to me. 900 medallions being sold in a fire sale is almost certain to cause big problems for other medallion owners. This can’t be the only large medallion owner who has financing tied to their medallions, and some could even have clauses about a rapid deceleration in the value of the collateral. I’d be willing to place a pretty big bet that if these medallions get sold on the cheap you’ll see a domino effect in that market.
Are yellow cabs at risk of extinction?
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