Biggest bankruptcy in trucking history expected by mid-week (with video)
Story by:@ FreightWaves
Celadon Group (OTC: CGIP) will file for bankruptcy protection under Chapter 11 no later than Wednesday, December 11, according to internal sources. The Indianapolis-based, publicly-traded trucking carrier employed more than 3,200 drivers and took in more than $1 billion in gross revenue as recently as 2015.
More recent numbers are difficult to come by because Celadon had to restate its financial reporting after mismanagement and a complex accounting scandal that ultimately resulted in former executives being indicted on securities fraud charges yesterday, December 5.
But the imminent bankruptcy’s immediate cause was a technical default on Celadon’s covenants, the agreements between borrowers and lenders that can define requirements for cash reserves and earnings. Celadon entered the week with scant cash in its accounts to continue operations, but was negotiating with creditors Luminis and Blue Torch to secure further financing. Those talks fell through Thursday morning, December 4, when talks between Blue Torch and Luminis broke down over collateral issues. Blue Torch owned 70% of the debt and Luminus owned 30%.
Over-the-road drivers may be at risk of being stranded — our source could not verify that Celadon’s drivers would get home — and should fill their tanks at the earliest opportunity as the company’s fuel cards still work. Celadon’s 3,500 employees could lose their jobs soon.
Many top customers of the company have been notified, in an effort by management to mitigate freight being stranded after a filing. Celadon handles significant volumes of critical automotive freight and told its customers that it did not want their plants to shut down. Sources not associated with the company have also told FreightWaves that FedEx (NYSE:FDX) has stopped loading Celadon branded trailers.
Celadon will be the largest truckload carrier to file bankruptcy in history. The north-south truckload carrier has 2,695 trucks, including 2,000 in the United States, 360 in Canada, and 335 in Mexico. The company is a dominant carrier on the I-35 corridor, running freight from Laredo to the Midwest, with a large concentration in the automotive sector.
Story continues HERE @ freightwaves.com
Related story: Two former Caledon executives charged with bank and securities fraud
Source and credits: freightwaves.com // iTrucker / Mario Pawlowski