Copyright 2008, Traffic World, Inc.
Gainey Transportation Services insists it is operating normally after cautious lenders helped push the trucking company toward filing for Chapter 11 bankruptcy protection. In what may be the most dramatic evidence so far of how tighter credit markets are effecting truckers, the Grand Rapids, Mich.-based company was sued by Wachovia Bank for failing to repay more than $238 million of a $260 million loan taken out in 2006.
The company blames its creditors for pulling the plug too soon.
"The nation''s financial crisis has compelled our lenders, including Wachovia Bank, to make ill-advised decisions based on their own cash constraints," said Gainey CEO Harvey Gainey. "Our exhaustive efforts to negotiate a constructive agreement with our lending group have been met with a series of increasingly aggressive actions by these lenders."
Gainey offers brokerage, refrigerated, liquid bulk and dry van trucking. The company, established in 1984, operates 1,154 tractors and 2,830 trailers. It plans to continue operating while it reorganizes under Chapter 11 of the U.S. bankruptcy code.
"Our sound business fundamentals - which include positive cash flow and operating income - will continue to ensure our uninterrupted operations, including paying all suppliers, delivering all freight and meeting our payroll," Gainey said.
Tight credit has been a big problem for smaller trucking companies all year, with an estimated 1,800 bankruptcies counted in the first half of the year alone. One of the most recent losses was Homberger Trucking, a 58-year-old LTL carrier in Huron, Ohio. "I think we''re going to see a spike again in the first quarter when a lot of payments come do for trucking companies," said supply chain consultant Rosalyn Wilson.
But the recent financial bailouts by the U.S. government and corresponding clampdown on credit could spell trouble for larger trucking companies, as well.
YRC Worldwide recently drew against its $600 million credit line to pay off debt early in anticipation of jittery lenders. Even though YRC expects to remain in full compliance with all terms of its credit agreements, "there is no guarantee that compliance will continue going forward," said David G. Ross of Stifel Nicolaus.
Swift Transportation, one of the nation''s top three trucking companies by revenue, has struggled with heavy debt from its 2007 management buyout while having to deal with weak freight volume and blistering fuel prices earlier this year. At one point this year, the company had $835 million in outstanding senior bonds, a debt analyst said. The company reported $3.2 billion in revenue in 2007.
For competitors standing on firmer financial ground, the tighter credit markets could turn into an opportunity to gain much needed business.
"Unless freight and financial market conditions improve quickly, (Werner Enterprises) believes there is a higher probability of increased carrier failures," the company said. "Werner believes its financial strength as a debt-free company places it in a unique position to capitalize on the opportunities ahead."