Thursday, October 23, 2008

3rd largest U.S. non-asset based trucking company files Chapter 11

According to an article in American Shipper, Greatwide Logistics will allow itself to be sold to the original lien holders. Apparently some hedge funds have bought into this trucking broker.

This part of the article is interesting:

"Dallas-based Greatwide is the third-largest, non-asset-based trucking company in the United States, with annual revenue of about $1.2 billion and major customers such as Wal-Mart, Target and IBM. Its business model relies on using independent agents rather than owning its own trucks to move freight.
The move essentially means that two hedge funds holding Greatwide’s primary debt, Centerbridge Capital Partners and D.E. Shaw, forced out private owner Investcorp and will now have the first opportunity to own the company."

First off, a non-asset-based trucking company is a truck broker. They just match loads with trucks, bill the customer, pay the trucker, and take some money for themselves. The problem is there isn't much margin. When times are good they can do really well, but if they don't watch the pennies, things can turn ugly fast (which apparently is what happened).

I love this quote from the company.

"Chief Executive Raymond B. Greer said in a statement. “Greatwide’s fundamentals are solid. We believe the proposed transaction is a prudent and necessary step to significantly reduce our debt and interest burden in order to enhance our flexibility to continue to invest and grow.”

I hope the companies using Greatwide know they will responsible to pay the truckers if Greatwide doesn't. Probably not. It's been some time since bankruptcies like this, which forces everyone to read the rule book. Only us old folks know from experience how this goes. But then, all of these truckers are small independents, and unless someone is helping them go after their money, they will probably be the ones who get stiffed.


Anonymous said...

Wow, you posted a comment like you are so insigful, yet you really dont know anything about the company or the transaction taking place.

Look a little deeper next time as comments like this are the only really trouble the company faces at this point. They have solid DIP financing. Solid operating margin and a strong buyre stepping up to the plate. Sure it's a bad thing for the last round of investors, but without the debt burden, the company will move forward stronger than it has ever been and stronger than most of its competitors. With $74 million of financing during this process, no truckers can or will get hurt.

Lynda Applegate said...

If what you say is true, then why not give your name and contact?

Get in touch with me in a year, and let's see how things are going.

It's not just the financing. The economy is going south, meaning less business for everyone. These folks don't have deep pockets, so the chance of them surviving a major economic downturn is questionable.

Anonymous said...

Wrong again. They now have $74 million of financing, and a buyer that will convert their debt into equity.

BTW, they are not only a broker, that's less than 20% of their business. The rest is contract based dedicated trucking and contract based warehousing.

The economic downturn faces all companies, so I can't really comment on that. But, the company has managed the pennies fairly well. They were caught in the middle of an overpriced sale of the company back in 2006 that saddled them with too much debt. In a down economy with rising fuel prices their operating margins were hurt, but they still have industry leading operating profits - just too much debt. It is now gone. Talk to you in a year.......