Huge shipping company shuts down and files Chapter 7 bankruptcy
Financial distress in the logistics industry, which companies have dealt with since the Covid pandemic, has led several trucking companies to file Chapter 11 to reorganize or, in some cases, file Chapter 7 to liquidate their assets.
Leading national trucking companies like J.B. Hunt Transport Services (JBHT) , Knight-Swift Transport Services (KNX) and XPO (XPO) have provided formidable competition for smaller companies that struggle to generate adequate revenue to stay afloat.
When logistics companies run into financial problems, they might turn to bankruptcy court to reorganize their debts if they have exhausted financing options. Chapter 11 can give debtors breathing room to restructure debt. If all of their efforts fail, some companies land in Chapter 7 to liquidate whatever assets remain.
This year, with rising interest rates and inflation issues adding to high debt loads and tight competition, several logistics companies have reached the end of the trail and needed to file Chapter 7 liquidation. In some cases, an expensive lawsuit can drive a company into Chapter 7.
J.J. & Sons Logistics of Clint, Texas, on Jan. 22, 2024, filed for Chapter 7 liquidation in the U.S. Bankruptcy Court for the Western District of Texas four days before the scheduled start of a trial for a wrongful death lawsuit filed by the family of a former company truck driver who had died from drowning in 2016.
Freight forwarder company Boateng Logistics permanently shuttered its business as the firm on Feb. 22 filed for Chapter 7 bankruptcy with plans to liquidate, and 92-year-old trucking company Arnold Transportation Services laid off all of its employees and shut down operations five days before filing for Chapter 7 liquidation on April 30.
Arnold's liquidity position had been deteriorating since its factoring lender discontinued support of the company and certain large customers had ceased doing business with Arnold.
Truck shipping products. Shutterstock
US Logistics Solutions liquidates in Chapter 7 bankruptcy
Finally, U.S. Logistics Solutions, a shipping company owned by private equity firm Ten Oaks Group, on June 21 filed for Chapter 7 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas in Houston as it has shut down operations, laid off its employees and plans to liquidate its assets.
The company listed $100 million to $500 million in liabilities and up to $100 million in assets in its petition.
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The Humble, Texas, based logistics company said in a June 24 statement that it needed to file Chapter 7 bankruptcy after a lender notified the firm that it would no longer provide necessary funding to continue operations. The company said it would "liquidate immediately."
The company asserted that it sought all possible alternatives to avoid filing bankruptcy, including seeking additional investment and strategic partnerships, but the lender's "abrupt cessation of funding left the company with no other recourse."
Despite news reports that the company had laid off about 2,000 employees, Ten Oaks Group claimed the number was inaccurate and said it had a employed 1,226 workers, including 864 direct employees, 305 contractors and temporary workers and 57 owner-operators, FreightWaves reported.
A review of the Texas Workforce Commission website shows that U.S. Logistics Solutions did not file a 60-day notice to employees that's required under the Worker Adjustments and Retraining Notification Act for companies with more than 100 employees. Failure to file the notice led a former employee on June 24 to file a class-action adversary proceeding complaint in the U.S. Bankruptcy Court against the debtor.
The Charlotte, N.C.-based private equity firm in a statement said that all of the shipping company's employees had received their final paychecks, according to FreightWaves.
In addition to problems with former employees, customers are also having issues with the debtor. Some customers have been unable to locate and retrieve their freight from the company's 19 terminals located mostly in the Eastern region of the country, FreightWaves reported.
A review of the company's website on June 26 shows that it has been disabled. If customers attempt to log into the website, they receive messages "Under Maintenance" and "Sorry, we're doing some work on uslogisticssolutions.com."
Ten Oaks Group acquired US Logistics Solutions, formerly Forward Air Solutions, in 2021 for $20 million, according to FreightWaves.