Coach USA, the largest privately owned bus company based in the United States, filed for bankruptcy on Tuesday to sell off business assets, citing “significant challenges.”
Chapter 11 was filed in the U.S. Bankruptcy Court for the District of Delaware “to facilitate sale processes to preserve jobs, ensure continued service, and maximize the value of its businesses,” the company said in a press release on June 11. “Following the COVID-19 pandemic, the company has faced significant challenges, as ridership and demand in the industry have remained well below pre-pandemic levels.”
According to the firm, court-supervised sale processes would provide “time and flexibility for the company to maximize the value of its assets.”
Coach USA estimated it has between 1,000 and 5,000 creditors, said the bankruptcy petition. Assets and liabilities were calculated to be in the range of $100 million to $500 million.
A Chapter 11 bankruptcy, also known as a “reorganization” bankruptcy, allows the company to keep its business alive, continue operations, and pay off creditors over time. The firm can also borrow money with court approval. However, it must get the reorganization plan approved by creditors and confirmed by a court.
As part of the court-supervised sale processes, Coach USA entered into an asset-purchase agreement with Bus Company Holdings US (BCH US) LLC, an affiliate of the Renco Group Inc.
Under the agreement, BCH US will take over some of Coach USA’s bus lines, including Dillon’s, Elko, Megabus Retail, Montreal, Olympia, Rockland, and Suburban. The deal also includes existing Megabus intellectual property and retail operations.
Coach USA entered into asset-purchase agreements with affiliates of AVALON Transportation LLC for its Lenzner, Kerrville, All West, and ACL Atlanta bus lines.
The company said it was pursuing “value-maximizing going concern sales” for the remaining segments and assets not included in the asset purchase agreements with BCH US and AVALON affiliates.
In a “going concern sale,” a company seeks to sell a business as-is to a buyer in such a way that operations are not disrupted.
“Taken together, once completed, these proposed transactions will preserve thousands of jobs and ensure uninterrupted passenger transportation services to millions of passengers throughout the United States and Canada, many of whom rely on the Coach USA transportation network,” the firm said.
If other bids are submitted, Coach USA will conduct auctions, with the stalking horse bidders setting the floor price.
Coach USA has also received a commitment for debtor-in-possession (DIP) financing, which provides the firm with a $20 million cash infusion. DIP financing, only available to firms that have filed Chapter 11 bankruptcy, allows Coach USA to raise capital to fund operations while the bankruptcy progresses in court.
American Bankruptcies Rise
Multiple companies have gone bankrupt this year. In May, specialty fashion retailer Rue21 filed for bankruptcy. In April, Express Inc., which dealt in casual office attire, filed for bankruptcy as well. In addition, fabrics and crafts retailer Joann and cosmetics brand The Body Shop ceased operations in the United States.In the first quarter of 2024, overall commercial bankruptcies rose by 22 percent compared to the same period in 2023, the American Bankruptcy Institute (ABI) said in an April 2 press release, citing bankruptcy data provider Epiq Bankruptcy. Chapter 11 bankruptcies were up 43 percent in first quarter 2024 compared to first quarter 2023.
Michael Hunter, vice president of Epiq AACER, pointed out that March marked “20 consecutive months that total, individual, and commercial bankruptcy filings have registered monthly year-over-year increases.”
“Factors contributing to this trend are the higher cost of funds and interest rates, a reduction in consumer discretionary spending, higher housing costs, and a continued drawdown of excess savings.”
The firm expects U.S. consumer spending, investment, and government spending to grow by at least 2 percent this year and exports by 4 percent.
It predicts the Federal Reserve will cut interest rates twice in the second half of 2024 (though after the recent policy meeting of Federal Open Market Committee, likely only one cut will occur). Job growth may slow, while the unemployment rate is projected to peak at 3.9 percent before gradually declining because of “persistently tight labor markets,” according to the company.
“Despite an expected slowdown in the coming quarters, we expect the U.S. economy to post real growth of 2.4 percent this year and 1.4 percent in 2025,” Deloitte said.
On May 30, the U.S. Bureau of Economic Analysis said that the first-quarter GDP grew by 1.3 percent, down from the 3.4 percent growth in the fourth quarter of 2023.
According to a June 10 S&P Global report, there were 62 new U.S. corporate bankruptcy filings in May, taking the total to 275 bankruptcies so far this year. This is roughly close to the 277 bankruptcies seen during the same period last year and is the second-highest since 2010.
Standard & Poor’s only covers bankruptcy data of public companies or private firms with public debt where either assets or liabilities at the time of bankruptcy are greater than or equal to $2 million, and private companies where assets or liabilities are greater than or equal to $10 million.
The consumer discretionary sector saw the most number of bankruptcy filings in 2024 at 39, followed by health care with 33, and industrials at 31.
