The trucking industry recession over the last year has been characterized by decreased demand for shipping which has led to lower freight rates and inflationary conditions that brought on higher operating costs. Interest rates also increased over this period, raising the cost of companies' debt obligations.
All of this financial distress has forced trucking and logistics companies into out-of-court restructurings or bankruptcy court filings to reorganize their businesses, sell their assets as a going concern, or liquidate and shut down their operations.
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The logistics industry, which includes trucking, has faced severe distress that has led many companies to take extreme measures, such as filing for Chapter 7 bankruptcy liquidation.
Related: Another doomed trucking company files Chapter 7 bankruptcy
Among the logistics companies that followed the liquidation trend was Sunset Logistics which fell into financial hardship and needed to file for Chapter 7 bankruptcy protection to liquidate its assets after ceasing operations.
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The Irving, Texas, logistics company and its affiliates on Oct. 3 filed their petition in the U.S. Bankruptcy Court for the Northern District of Texas in Dallas blaming a bad economy, low freight rates, and rising costs.
They also faced a lawsuit filed in April 2024 in the U.S. District Court for the Northern District of Alabama from their factoring company Porter Capital of Birmingham, Ala., alleging Sunset Logistics and its affiliates owed it $5 million, plus accruing costs and expenses, from a defaulted recourse factoring agreement.
Another logistics company that filed for Chapter 7 bankruptcy liquidation and faced financial distress was freight forwarder company Boateng Logistics, which ceased operations after it on Feb. 22 filed for Chapter 7 bankruptcy with plans to liquidate.
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Star Transportation files Chapter 11 to reorganize
And now, trucking company Star Transportation PA and five affiliates have filed for Chapter 11 bankruptcy to reorganize their businesses after one of the company's lenders issued an order to repossess 47 of its trucks for which it had provided financing.
The Miami, Fla.-based company and affiliates Finance Solutions LLC, MDL Business Group LLC, Star Transportation A, Star Truck Service Inc., and US Express Line LLC filed their petition on Nov. 1 in the U.S. Bankruptcy Court for the Southern District of Florida listing $1 million to $10 million in assets and $10 million to $50 million in liabilities.
Related: Distressed hospital chain files for Chapter 11 bankruptcy
The debtor said in court papers that it faced financial distress that the trucking industry has battled for several years, which included rising costs, increased insurance claims, and a high cost of maintaining and repairing trucks and trailers. Some repair costs tripled from what they were a few years ago, Company President Victor Khramov said, according to FreightWaves.
Star Transportation faced litigation before filing for bankruptcy
The bankruptcy filing followed a lawsuit submitted about a week earlier by two former workers who alleged in federal court that the trucking company had misclassified workers as independent contractors instead of employees in violation of the Fair Labor Standards Act.
All litigation is subject to an automatic stay while the bankruptcy case proceeds.
Star Transportation operates a fleet of 219 trucks and trailers, which includes owned and leased equipment.
The debtor obtained interim approval of a debtor-in-possession factoring agreement with RTS Financial Services to finance its continuing operations.
Star Transportation needed the factoring agreement since it did not have sufficient unencumbered cash or other assets to continue to operate during the Chapter 11 case or to proceed with a reorganization without the interim approval of the factoring DIP facility, court papers said.
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