Logistics companies have been battling financial distress since the Covid pandemic significantly impacted the industry in 2020.
The industry faced about 3,000 trucking company closings and thousands of job layoffs in 2020. A driver shortage followed when the pandemic subsided, increasing the demand for drivers. Then, shipping rates declined in 2022 and fuel doubled in price.
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Next, shipping companies faced more challenges like inflation, high interest rates and rising insurance and wage costs over the past two years. The industry couldn't buy a break.
Leading trucking companies J.B. Hunt Transport Services (JBHT) and Knight-Swift Transport Services (KNX) recently had disappointing earnings reports after facing weaker demand for their services this year as inflation discouraged spending on new goods
Several trucking and shipping companies have been forced to file Chapter 11 bankruptcy this year, and some have filed Chapter 7 to liquidate. In one case, a company is sort of doing both, filing Chapter 11 and liquidating.
Pitney Bowes affiliate files Chapter 11 bankruptcy to liquidate
Global e-commerce shipping company DRF Logistics on Aug. 8 filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas in Houston seeking to wind-down and liquidate its business.
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The debtor will also seek a sale of substantially all of its assets and to provide distributions to its stakeholders, according to a declaration from the company's Chief Restructuring Officer Eric Kaup of Hilco Global.
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The debtor listed $100 million to $500 million in assets and liabilities in its petition. Its largest unsecured creditors include Priority Express Courier, owed $2.3 million; Spot Freight, owed $2.1 million; and XPO Express, owed $1.7 million.
DRF provides domestic e-commerce parcel services, including delivery, returns, underlying client and consumer facing software and cross-border modular delivery solutions to 200 destinations.
The Austin, Texas-based debtor was previously an indirect subsidiary of Pitney Bowes Inc. (PBI) after the global shipping company acquired the company's predecessor Newgistics in 2017. Since purchasing the company, the debtor has reported significant losses each year caused by sizeable overcapacity which forced reduced pricing on volume.
Because of fixed costs it incurred in a buildout of its shipping network, the debtor sought to maintain volume by offering discounts and working with clients with lighter weight volume deeper into its network, which reduced its overall revenue per piece.
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Pitney Bowes funded the debtor's annual losses, which averaged about $97 million a year since 2019, but began a strategic review of the debtor's global e-commerce business in early 2023. The company unsuccessfully sought a sale of the debtor as a going concern and instead considered an out-of-court wind-down of the company or potential Chapter 11 bankruptcy filing.
To enable the debtor to file Chapter 11, Pitney Bowes divested of majority voting rights of the debtor, handing 81% voting interest to a Hilco Global affiliate, while maintaining 19% voting rights and 100% economic interests in DRF Logistics. The debtor arranged secured debt amendments to release it from about $1 billion in secured debt to allow for the bankruptcy filing to commence.
A day after the Chapter 11 filing, the debtor filed a restructuring support agreement that calls for an orderly wind-down of DRF's business in a plan of liquidation.
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