Reuters and the Wall Street Journal have reported that a hauling company responsible for moving vehicles from manufacturers to dealers has filed for bankruptcy protection, just a month after it faced an involuntary Chapter 11 petition from three of its lenders.
Allied Systems Holdings Inc. and Yacaipa Cos. filed for Chapter 11 on June 10 in the U.S. Bankruptcy Court in Delaware. The bankruptcy was due, according to the filing, to a worsening financial situation and impending litigation from their creditors.
The company is based in Atlanta and has Canadian units that together total 18 subsidiaries – all 18 are listed in the bankruptcy protection.
There have been several bankruptcy filings made in the U.S. auto industry. This is Allied System's second filing in the last seven years.
In 2009, following in the footsteps of bankruptcies filed by auto heavyweights General Motors Corp. and Chrysler LLC, Allied stop making some of its loan payments and began restructuring.
Billionaire Ronald Burkle runs Yucaipa. Yucaipa owns a 63 percent stake in Allied due to the earlier filing. According to court records, Allied emerged from that bankruptcy in May of 2007.
Allied started loosing revenue prior to the global financial crisis. In 2011 they dropped 37 percent from the year before, with revenue totaling $343 million. That figure was also a 58 percent decrease from 2007.
Cited for the loss of revenue were slower than average sales and loosing their U.S. contracts with GM, Chrysler, Toyota and Honda. The company combated the low sales by raising its prices.
Black Diamond CLO 2005-1 Ltd, BDCM Opportunity Fund II LP and Spectrum Investment Partners LP filed involuntary Chapter 11 petitions against Allied on May 17. They had sued Yucaipa four months earlier in a New York state court. The three lenders claimed that Yucaipa caused Allied to default to prevent them from being repaid as well as exercising other rights.
Scott Macaulay, the Allied Chief Financial Officer, wrote in the court filing, "In light of the involuntary bankruptcy cases and its financial condition, Allied determined that it would be in the best interests of (its) estates to proceed under Chapter 11."
Allied, in wishing to continue operations and maintain its approximate 1,835 employees, has asked for $20 million in financing.
The Haul Insurance, as well as Mexican and Bermuda units, are not listed in the company's bankruptcy filing. In regards to the Canadian units, Allied stated that they plan to seek recognition of the Chapter 11 cases there.
After a failed proxy fight to win board seats, Burkle divesting much of his stake in Barnes & Noble Inc.
The public bankruptcy records are listed as: Allied Systems Holdings Inc et al, U.S. Bankruptcy Court, District of Delaware, No. 12-11564. The New York case is BDCM Opportunity Fund II LP et al v. Yucaipa American Alliance Fund I LP et al, New York State Supreme Court, New York County, No. 650150/2012.
Hurtling toward or slowly edging to a bankruptcy doesn't change the inevitable: you must contact a bankruptcy attorney for help with your filing. Protect your assets, your business and plan for your future once you go over this hurdle and file.