St. George Logistics has just surpassed a crucial obstacle in their Chapter 11 bankruptcy case, which allows it to continue operations while it reorganizes its heavy debt load. A federal New Jersey bankruptcy judge has given final approval to a vital debtor-in possession (DIP) financing package which guarantees both the container freight station (CFS) and drayage sides of St. George Logistics will have access to their funds and therefore remain functioning throughout the whole bankruptcy process.
Background of the St. George Logistics Chapter 11 case
The company, which is based in Ohio, is one of the biggest port-to-door logistics providers and asset-based intermodal providers. It declared bankruptcy in January of this year after a lengthy freight recession and an aggressive acquisition strategy that left it with almost $1 billion in debt. The agreement reached with vital lenders, which is a prearranged reorganization support agreement, has been formatted to get rid of around 91% of that debt and will bring an estimated $150 million in new capital. This combination, according to management, will stabilize the general balance and will drastically reduce the interest costs.
The court ruling is a crucial proof of life in a slowing freight market
The recent financing court decision has been considered by many as a crucial proof on the ability of St. George Logistics as a company to be able to function properly and normally or face the threat of a complete and abrupt shutdown. The strategy of providing access to the entire debtor-in-possession facility and correlated motions, the court has granted St. George to continue paying all their employees, including drivers, insurers, warehouse partners, utilities, and third-party vendors, allowing the continuity of workflow across their nationwide network. Consultants who are familiar with the case confirm that the ruling essentially reduces the near-term risk of liquidation to zero, at least until the restructuring plan is conferred and executed.
Geoff Anderman, CEO of St. George Logistics, has repackaged the entire Chapter 11 process not as a failure of the company but as a brand-new opportunity to reorganize the company’s capital structure instead of a one-way liquidation destiny. He noted that all operations nationwide will continue their regular course and that both customers and employees will see no ceasing in their service.Â
Looking ahead
St. George Logistics is now looking to use their newly acquired timeframe provided by the debtor-in-possession funding and creditor support to steer through what it has been described as one of the most serious and difficult freight recessions in history. The goal is to emerge from court management within the next few months as a brand-new company with a better logistics platform for the benefit of all its customers and employees nationwide.  Â
