Comcar Industries Inc.

May 17, 2020

Florida-based Comcar Industries Inc. and 31 affiliates (the “debtors”) filed for chapter 11 bankruptcy in the District of Delaware — the latest trucking company to end up in bankruptcy court (Callback to “🚛 Dump Trucks 🚛 ,” a PETITION deep dive into the industry which included a review of Celadon Group Inc.’s chapter 11 bankruptcy filing). Comcar is a holding company with four stand-alone trucking business units ((as well as (a) logistics services, (b) supplies, parts and repairs, and (c) fleet maintenance services)). Through the bankruptcy filing, the debtors intend to effectuate a sale of all four units.

Each unit services a different part of the trucking market:

• CCC Transportation LLC (“CCC”) is a bulk bulk carrier that primarily handles construction materials;

• CT Transportation LLC (“CT”) is a flatbed carrier that specializes in construction materials;

• CTL Transportation LLC (“CTL”) is a liquid bulk chemical transporter; and

• MCT Transportation LLC (“MTL”) is a refrigerated and dry van commodities transporter.

Formed in the 1950s, the debtors grew over the years in order to provide all of these offerings. To do so, they, naturally, took on debt. Funded debt stands at $64.8mm including an ABL, a term loan, and various real estate-backed loans. Servicing the debt has been a challenge going as far back as 2014.

Trucking industry struggles have compounded matters. Per the debtors:

The trucking industry has experienced significant headwinds starting in 2019. During the first half of 2019, the $800 billion American trucking industry began to experience a recession and a reported 640 trucking companies went bankrupt. By mid-2019, the trucking freight market continued to soften. The combination of a decline in overall freight tonnage and excessive truck capacity in the market led to a significant decline in freight rates, and customers began to take bids at lower freight rates. Compared to the year immediately prior, 2019 showed a steady decline in freight rates, including spot freight rates and contractual rates.

Rates weren’t the only problem. Volumes also declined.

During 2019, truck volumes decreased for nine consecutive months and the trucking industry braced itself for a decrease in demand through the third quarter of 2020. As a result, spot and contract prices, which increased thirty percent (30%) in 2018, decreased twenty percent (20%) in 2019. The decrease in truckload linehaul rates was driven by (1) spot rates that were below contract rates by unsustainably larger margins than, (2) capacity additions and (3) stalled growth in the consumer and industrial economy.

All of this hit the the top and bottom lines. In 2019, the debtors suffered a 26% YOY revenue decrease across all units. CCC got hit the most, down 44.2%. CT got hit the least. Yet even that was down 19.7%. In total, the debtors lost $25mm in 2019 and $6mm through March 27, 2020.

Luckily, as with Celadon Group Inc. previously, there is a market for these trucks. The debtors have a buyer lined up for the CT and CTL businesses for $9mm and $8.6mm, respectively. Similarly, the debtors have a buyer for the MCT business. They would like to proceed with private sales of each of these businesses stating that “…the terms offered … are materially superior to the terms that the Debtors could hope to achieve at any auctions….” Pursuant to the proposed DIP, these sales need to be consummated by the end of July.

The debtors pre-petition ABL and Term Loan lenders (which includes an affiliate of PIMCO) have committed to funding a $15mm DIP — some of which will pay down pre-petition debt, some of which ($1.33mm) will roll-up pre-petition term loans, and the rest for liquidity to fund the cases.

• Jurisdiction: D. of Delaware (Judge Dorsey)

  1. Capital Structure: $14mm ABL (Sterling National Bank), $25.3mm Term Loan (B2 FIE VIII LLC as lender, US Bank NA as agent), $6.2mm secured real estate loan (CenterState Bank NA), $7mm CWI Real Estate Loan (Commercial Warehousing Inc.),

  2. Professionals:

     • Legal: DLA Piper US LLP (Stuart Brown, Jamila Justine Willis, Tara Nair)

     • Independent Manager: Tobias Keller

     • Financial Advisor/CRO: FTI Consulting Inc. (Andrew Hinkelman)

     • Investment Banker: Bluejay Advisors LLC

     • Claims Agent: Donlin Recano (*click on the link above for free docket access)

  3. Other Parties in Interest:

     • Prepetition ABL Agent: Sterling National Bank

       • Legal: Greenberg Traurig LLP

     • Prepetition Term Loan Agent and DIP Agent: US Bank NA

       • Legal: Seward & Kissel LLP

     • Prepetition Term Loan Lender & DIP Lender: B2 FIE VIII LLC (Pimco)

       • Legal: Latham & Watkins LLP (Jason Bosworth)