Investor to Acquire 80% Stake in Gainey Reorganization Plan
By Rip Watson, Senior Reporter
This story appears in the Aug. 17 print edition of Transport Topics.
Gainey Corp., a Michigan fleet seeking to emerge from bankruptcy, has reached agreement with lenders and unsecured creditors on a plan to give an 80% holding in the reorganized company to Arizona investor Najafi Companies.
Harvey Gainey, chief executive officer of the company that bears his name, told Transport Topics on Aug. 11 that he would remain CEO under the bankruptcy reorganization plan.
Najafi would provide capital but would not have any role in the day-to-day management of the company, Gainey said.
Gainey Corp., Phoenix, operator of Gainey Transportation and other trucking services, has been in bankruptcy for 10 months. Its filing followed a court action by Wachovia Corp., the head of its lending group, which sought $238 million and said the carrier had violated the terms of its credit agreement, a claim that Gainey disputes.
“After extensive negotiations with the lenders, we came up with an agreement to do a sale,” said Gainey, whose company is No. 73 on the Transport Topics 100 list of the largest for-hire carriers in the United States and Canada. “It has been a tough 10 months of negotiations. We feel really good about the outcome.”
He said that details of the plan are still being negotiated. Najafi has agreed to furnish some debt to provide funding for the company, though the amount hasn’t yet been determined, Gainey said.
Najafi, which hasn’t previously invested in trucking companies, didn’t return calls requesting comment. Its Web site said the company’s investments include resorts, hotels and consumer products. Najafi claims its $1.1 billion in assets makes it the largest investment company in Arizona.
Under bankruptcy rules, another person or company could make a higher bid once the details of the Najafi/Gainey plan are disclosed. Gainey said he doesn’t expect another bidder will emerge. The plan is scheduled for presentation in U.S. Bankruptcy Court on Aug. 26.
“The plan calls for no changes in operations,” Gainey said, which means that 2,200 company employees will keep their jobs if the plan is approved by Judge James Gregg, who is located in Gainey’s home city of Grand Rapids. Most of Gainey’s drivers are company employees, though part of its services are provided by owner-operators.
In addition to truckload, Gainey also has less-than-truckload and brokerage operations.
Gainey Corp. this year has suffered a decline in revenue of between 20% and 30%, but its cash flow and earnings before interest, taxes, depreciation and amortization are positive, the CEO said without giving details.
The company hasn’t lost customers and its revenue decline is consistent with the rest of the industry, he said.
The privately held company will expand its board to include representation from Najafi. Gainey said he and his wife currently comprise the company’s board.
Gainey’s filing on Oct. 14 was the second-largest bankruptcy filing in 2008, topped only by Greatwide Logistics, which is No. 23. Greatwide emerged from bankruptcy earlier this year. Two other companies on TT’s 100 list failed last year and shut down.
