Bankruptcy judge rules on new Coach America filing
Judge Kevin Gross of the United States Bankruptcy Court for the District of Delaware granted approval on Thursday on a series of first day motions filed by Coach America Holdings, Inc. to help support company customers, employees, suppliers and business partners. Coach America Holdings Inc. filed for Chapter 11 bankruptcy on Tuesday in the U.S. Bankruptcy Court for the District of Delaware. As of late November the company, with its more than 3,000-vehicle fleet, had $402 million in debts and some $274 million in assets.
Coach America was granted the following motions: payment of pre-petition and post-petition employee wages, salaries, business expenses and benefits, including medical, dental and life insurance benefits for current employees; interim approval for debtor-in-possession (DIP) financing of $30 million for use by the company to continue operations and purchase and pay for goods and services; and financing authority to pay certain pre-petition commitments that are necessary in the course of conducting business.
The DIP financing package was provided by a steering committee of Coach America’s existing senior lenders. The court has scheduled a Jan. 27 final hearing on DIP financing.
In late November 2006, Fenway Partners, a middle market private equity firm, entered into an agreement to acquire Coach America, then the largest tour and charter bus operator and the second largest motorcoach services provider in the U.S., from Kohlberg & Company. The New York firm acquired Coach America for $60 million. The company was generating $393 million in revenues at that time. Fenway became the company’s largest shareholder when it invested in Coach America back in 2006.
Red flags around the company’s financial situation appeared in February 2011 when Coach America’s lenders, along with Fenway Partners, amended and restated the company’s senior secured credit facility new investment and debt-to-equity conversion together totaled close to $50 million.
“The approval of Coach America’s first-day motions by the court is an important initial step in the restructuring process and allows us to move forward with our normal operations, including paying vendors and suppliers in the ordinary course of business,” said George Maney, CEO of Coach America. “We remain focused on serving our customers, and believe that the prompt approval of these ‘first day orders’ is good news for the company, as well as for our customers, employees, suppliers and business partners.”
Meanwhile, on Wednesday Standard&Poor’s Ratings Services lowered its corporate credit rating and first-lien debt issue rating on Coach America Holdings Inc. to ‘D’ from ‘CCC’. At the same time, Standard&Poor’s lowered its second-lien debt issue rating to ‘D’ from ‘CC’. The ‘D’ ratings reflect Coach’s Chapter 11.
– Glenn Swain