Pride sale to founders rejected, company to wind down operations

A recommendation by bankruptcy Monitor Ernst & Young to sell Pride Group back to its founders for $56 million and maintain the company as a going concern was not met well by stakeholders, and just one day later, in its 13^th report, the Monitor indicated Pride operations will be wound up.

How to wind up such a large entity in an orderly manner – and how to cover the costs of doing so – is currently being addressed, the Monitor said in its Aug. 8 report.

“Given the feedback it has received to date, the Monitor no longer views a going-concern restructuring plan as a feasible option given the lack of stakeholder support for it,” the Monitor said in its Aug. 8 report.

“Accordingly, the Pride Entities and the CRO (chief restructuring officer), in consultation with the Monitor, intend to continue to move forward with a centralized, coordinated and controlled disposition and wind-up of the remaining Pride Entities assets.”

Restructuring plan denied

The CRO had put forward a plan that provided for “the return of a significant portion of the recourse lenders’ collateral over a short period of time – specifically, 3,000 trucks were anticipated to be returned to the lenders in four months’ time, a significant feat given the dispersion of vehicles across North America. The remaining collateral was intended to position the Pride Entities for emergence from the proceeding as a going concern.”

However, creditors rejected the proposed turnover, demanding collateral be returned to them immediately, the CRO reported. Also, a hoped-for recovery in freight markets and equipment prices failed to materialize.

“Instead, the market for new and used trucks has continued to deteriorate, for the Pride Entities and all other new and used truck vendors. This has resulted in fewer sales and lower ticket prices for vehicles sold and lower actual commissions to the Pride Entities,” the CRO reported.

For its part, the Monitor wrote: “An orderly disposition is imperative, given the vast number of vehicles in the Pride Entities’ fleet across North America, in addition to the thousands of leased vehicles (most of which are constantly in transit). 

“Any form of wind down will require liquidity to fund the necessary payroll, transition costs, transfer of assets to the applicable securitization parties, and administration costs of the Pride Entities. Without this funding, employees would have to be immediately terminated, customers would be stranded, committed and in-progress sales would be abandoned, leases would not be serviced, delinquency rates would increase, and a large number of vehicles would be abandoned without the critical infrastructure needed to support their retrieval or to determine competing claims against the assets of the Pride Entities.”

Pride Group was funding its ongoing operations largely from funds issued under a $30-million Debtor-in-Possession (DIP) financing. However, the loan matured at the end of July and has been fully tapped.

Gordon Brothers to fund, orchestrate wind-up

The Monitor has selected Gordon Brothers to provide the required funding and manage the orderly wind-up of Pride Group operations. The company, the Monitor wrote, has more than “100 years of combined experience of providing capital in distressed situations across various industries, including, but not limited to, transportation and equipment, real estate, accounts receivable, lease portfolio purchases, inventory and intellectual property.”

It acted as co-agent in selling more than 60,000 rolling stock assets belonging to Yellow Corp. “in one of the largest — if not the largest — dispositions of commercial and industrial equipment ever.”

The Monitor also asked the court for payment relief on behalf of Pride Group so it can continue operations until Sept. 8, at which time it’s expected funding will be secured to execute the wind-up.

“Unless the requested relief is granted, there will not be sufficient liquidity to fund operations of the Pride Entities, including payroll,” the Monitor claimed. “Without employees, customers will be stranded, assets will be abandoned, sales would cease, and lease servicing would stop.”