USA had grown rapidly from 2 trucks to almost 600 trucks and roughly $100M in revenue in less than 10 years without the appropriate infrastructure and controls to support a larger business. Prior to GGG’s involvement, USA had sustained significant losses due to:
- Significant debt burden buying new tractors and trailers it did not need
- Unexpected fuel spikes
- Competitive pressure to decrease rates with customers
- Highly leveraged balance sheet across many lenders
- Other management issues including significant non-essential spending
USA had made multiple attempts to restructure existing debt payments, refinance equipment, and bring in investors to help fund the business. In difficult times during the trucking industry, the Company appeared to be holding their own. However, it was later uncovered that the issues of the Company were far worse
than reported on their books and records.
GGG was introduced to management, and within a week recognized that the books were significantly inaccurate. Having communicated with the key lenders, GGG took over as Chief Restructuring Officer and Controller as the company was filed under Chapter 11 of the United States Bankruptcy Code in the Southern District of Texas in Corpus Christi.
Complete replacement of management and board while circumstances required that the individuals who caused the issues needed to remain in their positions as they had all the customer, driver and employee relationships. GGG focused on solidifying the core business of the Company, its contracts and relationships, knowing that if there was a business to be reorganized, the customers and employees were paramount to the solution. As interim CEO, Mr. Friedberg found himself with roughly 600 employees with offices in McAllen, Laredo and Dallas in TX as well as a small office in Monterey, Mexico. Mr. Friedberg had to quickly restructure the internal resources to develop a simplified organizational chart and empower middle management (which was mostly nonexistent) and earn the trust of the employees that had been mistreated for years. As is the case with all trucking companies, the daily management involved getting a handle on the shop and maintenance to keep the trucks running, safety requirements, staffing of drivers, insurance and regulatory management, utilization of equipment to best service their customers, managing employees and management of critical vendors.
On the finance front, it was clear from the beginning that most of the balance sheet and financials needed to run the business had to be recreated on a going forward basis in order to have clean data to make well informed decisions. Having established use of cash collateral through a DIP facility with the Company’s senior secured creditor, GGG worked closely with equipment lenders to establish collateral values, produce and track cash needs and work towards a Plan of Reorganization.
USA Dry Van was able to have an uncontested Plan of Reorganization as of the date of the Confirmation Hearing 10 months from the start of the case.
With roughly 40 secured lenders and 300 creditors, 600 disparate employees across 4 locations and 100 customers, keeping the business going while simultaneously developing a viable plan of reorganization was a massive challenge.
Due to GGG’s hands on involvement the Company had:
- Collected 99% of the pre-filing accounts receivable and was able to reduce the bank’s exposure on its pre-petition debt
- Retained virtually all the customers while increasing rates and profitability of the revenue
- Implement daily reporting and control systems for management and lenders
- Hired and trained permanent replacement management
- Closed non useful terminal and other terminal expenses in line with new budgets
- Saved nearly 600 jobs in the Rio Grande Valley (south Texas)
- Kept many vendors that relied on USA business to stay in business
- Successfully negotiated the continued use of all the company rolling stock except for one lender who collected 150 trailers that came off of lease and had to be returned.
- Allowed customers to continue to operate their manufacturing plants without interruption as there was not enough excess transportation capacity (for a period of time) in this area in the event USA went out of business
- Plan of Reorganization protected secured lenders and creditors that would have otherwise have had negligible recoveries if the Company had liquidated or just shut down
- Helped McAllen Economic Development Group keep one of the largest employers in their town
- Exited bankruptcy in roughly 10 months with an uncontested plan as of the Confirmation Date
At the end of the engagement, GGG was able to successfully leave the business in the hands of new
TMA Turnaround of the Year Award
GGG was awarded the 2011 Large Company Turnaround of the Year Award from the Atlanta Chapter of the Turnaround Management Association.