Leverage can be the undoing of even strong supply chain management companies. Dallas-based Greatwide Logistics Services, considered a solid operating franchise, filed for Chapter 11 bankruptcy protection in late October. Greatwide cited debt of about $600 million, a burden worsened by rising fuel costs, flat shipping volumes, and a demand for $32 million in additional collateral from Liberty Mutual for continued insurance coverage.
Greatwide's first lien lenders, Centerbridge Capital and DE Shaw, will provide $73.6 million of debtor-in-possession financing for ongoing operations, and they plan to acquire the bankrupt company from Dallas-based owners Hicks Holdings and Bahrain's Investcorp. The sale will be conducted under a provision of the federal bankruptcy code that allows other companies to offer bids that the court may consider to be superior to that of the first lien holders. However, a source close to Greatwide said the first lien holders are expected to prevail because rival bidders would be reluctant to take on an enormous debt load in return for ownership.
Hicks and Investcorp bought about 90 percent of Greatwide in December 2006 from private equity firm Fenway Partners for $730 million, of which $455 million was debt. Fenway, which had bought Greatwide in 2000 when it was called Transport Industries, reportedly made four times its original investment in the 2006 sale.
Richard Metzler, Greatwide's chief commercial officer, says there will be no change in operations and that the company's upper management will remain at the helm.
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