The challenge

After helping a trucking company avert a Chapter 11 filing related to a personal injury litigation action, CFGI continued to support the business’s ongoing refinancing efforts.

  • 3 weeks before a potential Chapter 11 filing, CFGI was brought onboard.
  • The issue was settled during remediation, averting the need for a Chapter 11 filing.
  • CFGI continued to assist the client with refinancing options.

Tough times in the transportation services sector coincided with high legal fees that had piled up over three years as a jury trial approached. At first, bankruptcy seemed to be the only way forward for a CFGI client, despite the potentially significant downsides. As we generated the necessary financial information to support this company as it prepared for its Chapter 11 filing, the forecasts we created helped demonstrate to the plaintiff the benefits of a consensual settlement, rendering the bankruptcy proceeding unnecessary.

In this situation, our client was a supply chain services company that shared its branding with other associated businesses. Though our client was operationally distinct from these other entities, the organization was interlinked, meaning the fate of one would certainly impact outcomes for all others.

As the trial date approached, Chapter 11 seemed to be the only possible option

A commercial trucking business was named as a defendant in a personal injury litigation that had begun to advance toward a jury trial after three years of legal proceedings. The damages claimed by the plaintiff exceeded the company’s insurance coverage, raising doubts about how the business would be able to afford the outcome.

In addition to the damages named in the case, the company had begun to face issues due to its rising legal costs. The expenses that had been incurred to defend the litigation were growing larger, and they were beginning to drain liquidity while putting further pressure on other available resources.

Revenue generation during this period had also been a problem that contributed to the business’s overall financial woes. A poor year in the freight market and increased insurance premiums contributed to the company’s operating losses.

The business found itself in a difficult position. The company was unable to settle the litigation, and with a trial imminent, it seemed that the only alternative was to file a Chapter 11 proceeding.

Such an action would have cast a dark shadow over the company’s affiliated businesses, which remained viable. Since the other organizations carried the same branding, if the trucking company were to complete a Chapter 11 filing, the reputation of these associated businesses could have also taken a hit.

While the filing that was being contemplated had been planned in such a way that current equity holders would have the opportunity to serve as a purchaser, the move was not without its risks. The process would carry a significant additional cost while also affecting the brand’s position in the business community and adversely impacting the entirety of business operations.

The CFGI solution

CFGI got up to speed quickly, preparing the necessary documentation

With only three weeks to go before the planned Chapter 11 filing, CFGI was brought into the picture. Our team was tasked with generating short-term financial forecasts to demonstrate the company’s ability to continue functioning and operating in Chapter 11. We wasted no time as we got down to business.

The trucking company was to be provided with debtor-in-possession loan financing by an affiliated business. This technique required the consent of the affiliate’s senior secured creditor. To assist in this time-sensitive process, we played an important role in supporting the bankruptcy counsel by providing financial information, including descriptions of the capital structure as well as cash management systems and other details that were essential during the preliminary phase of Chapter 11 preparations. Through the creation of reasonable and credible liquidation analyses, we also assisted the company in its final attempts to settle the litigation claim in an amount that it could afford.

The outcome

With a new path to follow, CFGI is helping the client pursue a healthy financial future

When the trucking company presented this information at mediation, it became clear to the plaintiff that they would receive a far lower recovery amount as a result of a Chapter 11 filing, as compared to what they would achieve in a consensual settlement. As a result, the litigation was ultimately resolved in a consensual settlement, and the Chapter 11 filing was averted.

In the months that followed, CFGI continued to partner with the transportation services company. We played a direct role in refinancing the enterprise’s mortgage and working capital facilities, which freed up money that was then used to help fund the settlement.

The restructuring services team at CFGI is ready to move quickly to support distressed companies facing a variety of different challenges. Our experts possess a wide breadth of experience and can help you identify new opportunities during difficult times. We also offer extensive subject matter expertise related to navigating financial difficulties relevant to a range of different industries. While the road ahead may be difficult, you can rest assured that you’ll come out of it as resiliently as possible with the assistance of CFGI’s restructuring professionals. Reach out to us today to learn more.