Same-day package company Velocity Express filed for Chapter 11 bankruptcy protection from its creditors today, announcing plans to restructure under a new owner, ComVest, in a debt-for-equity swap.
The transaction — a pre-packaged Section 363 Chapter 11 sale — will wipe out more than $100 million in debt, said Vincent A. Wasik, Velocity’s chairman and CEO.
Wasik and the company’s current management team will remain in place after the sale, and will own a minority stake in the restructured company, as will former bondholders.
“This restructuring will eliminate the significant debt that has burdened the company for the last few years and turn the company’s balance sheet into a major strength,” said Jose Gordo, a partner at ComVest Group, based in West Palm Beach, Fla.
Velocity will continue operating and expects to complete its restructuring and sale in 30 to 45 days. The company said its employees and contractors will not be affected, and payroll and benefits are guaranteed.
Velocity filed for bankruptcy in U.S. court in Delaware. The company was delisted by the NASDAQ stock exchange in August.
It is the target of several class action lawsuits claiming it misclassified employees as independent contractors.
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