Gainey Corp. Tweaks Reorganization Plan
This story appears in the Aug. 31 print edition of Transport Topics.
Gainey Corp.’s plan to reorganize into a trucking company with 80% ownership by an Arizona investor moved a step closer to completion last week after further negotiations yielded a fully supported plan, the company’s CEO said.
Harvey Gainey, who heads the Michigan-based fleet specializing in truckload service, said a revised plan was presented on Aug. 27 to U.S. Bankruptcy Court Judge James Gregg in Grand Rapids, Mich. Minor modifications to the $105.1 million plan to bring in Najafi Cos. as a majority owner were made after an Aug. 26 hearing, Gainey told Transport Topics.
“The essence of it is that all parties are now behind the plan, and it is going to go forward,” said Gainey, who would be a 20% owner of the new company if the plan moves forward.
He said he expects the transaction to be completed late in September.
Gainey filed for bankruptcy on Oct. 14, 2008, after major lender Wa-chovia Corp. sued the company for $238 million, alleging that Gainey violated terms of a credit agreement.
Daniel McDermott, the federal bankruptcy trustee for the Grand Rapids area, made a motion on Aug. 26 seeking the appointment of a trustee to oversee the reorganization process. Gainey said on Aug. 27 that court adjourned without any consideration of McDermott’s motion.
In his motion, McDermott questioned intercompany transactions between Gainey and family members and other insiders, saying the moves, such as a $3 million loan, drained cash from the trucking company when it was failing.
Gainey told TT those actions were proper and that they were assets of the company that would be part of the sale process.
The reorganization plan is being presented as a so-called 363 sale, which refers to a section of the federal bankruptcy code that contains procedures for functioning businesses to continue operations and emerge from bankruptcy. Under the “363” sale process, other bidders can emerge and make higher offers for the company during a specified period, which hasn’t yet been set.
The sale plan including Najafi, whose other investments are consumer products and real estate, was filed on Aug. 17. It calls for creditors to receive tractor and trailer equipment that could be sold to recover between 25% and 30% of Gainey’s debt, which tops at least $200 million.
The company, which operates trucking services under five trade names, saw its sales drop by about 25% last year to $300 million. Gainey ranks No. 73 on the Transport Topics list of the 100 largest U.S. and Canadian for-hire carriers.
Gainey said his company now has a positive cash flow and is showing an operating profit.
According to the trustee’s filing, Gainey lost $28 million in 2007.
Gainey was the second-largest U.S. trucker to seek bankruptcy protection last year. Only Greatwide Logistics, which has reorganized and remains in operation with more than $1.2 billion in sales, was larger.
