February 18, 2019 – BeavEX Holding Corporation and four affiliated Debtors (“BeavEX” or the “Company”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 19-10316. The Company, a provider of ground and air transportation, warehousing and courier services, is represented by Joseph M. Barry of Young Conaway Stargatt & Taylor, LLP. Further board-authorized engagements include Stretto as claims agent.
The Company’s petition notes between 10,000 and 25,000 creditors; estimated assets between $10mn and $50mn; and estimated liabilities between $50mn and $100mn. Documents filed with the Court list the Company’s three largest unsecured creditors as (i) Priority Express ($2.2mn trade debt), (ii) Alliant Insurance Services, Inc. ($358k trade debt) and (iii) Costello-Lichten & Liss Riordan PC ($324k legal settlement).
Proposed Sale to TFI International Inc.
In a press release
announcing the filing, BeavEX advised that it had reached an “agreement for certain U.S. Last Mile affiliates of TFI International Inc. (‘TFI International’) to acquire the majority of the Company’s assets, including its Guardian Medical Logistics division (‘GML’). To accomplish the sale in an efficient manner, BeavEx and its affiliates filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the ‘Court’). Concurrently, the Company filed a motion requesting approval of a stalking horse asset purchase agreement with TFI International and to initiate a competitive bidding process under Section 363 of the Bankruptcy Code designed to achieve the highest or otherwise best offer, or offers, for the Company’s assets. BeavEx expects to continue operating its business as usual and has obtained a commitment for debtor-in-possession (“DIP”) financing. Subject to Court approval, this DIP financing, combined with cash generated by the business, will provide liquidity to support ongoing operations during the process.
The agreement with TFI International, which was reached following an extensive examination of strategic alternatives and a robust marketing process and is subject to higher or otherwise better offers for the Company’s assets, provides total cash consideration of $7.2 million and includes the assumption of certain liabilities related to the acquired assets. Pursuant to Section 363, BeavEx intends to implement procedures to allow other qualified buyers the opportunity to submit competing bids for the same or other assets. “
Events Leading to the Chapter 11 Filing
In a declaration in support of the Chapter 11 filing (the “Van der Wiel Declaration”), Donald Van der Wiel, the Company’s Chief Restructuring Officer, detailed the events leading to BeavEX’s Chapter 11 filing; noting years of negative earnings following an ultimately failed attempt to adapt to technological changes impacting the delivery services sector.
The Van der Wiel Declaration states, “In November 2011, Eos Partners purchased the Debtors as a non-asset based (i.e. asset-light) provider of local route-based, same day transportation and logistics services that initially focused on providing financial delivery services to their customer base. However, due to subsequent technological advances in check scanning, the demand for a large portion of the Debtors’ financial services, in the form of paper check delivery services, was significantly reduced, thus negatively impacting the profitability of the Debtors’ asset-light financial services business model.
Beginning in the third quarter of 2012, in an effort to offset the declines in the financial services facet of their operations, the Debtors expanded their business model to an asset-heavy model in order to pursue customer segments requiring expanded services such as sortation, cross-docking and storage. However, the transition also required significant investments in fixed terminal labor and facility costs. The increased costs associated with the conversion from an asset-light business model to an asset-heavy business model coupled with the decline in the financial services, resulted in EBITDA losses of: $7.1 million in 2014; $8.7 million in 2015; $3.3 million in 2016; and $2.8 million in 2017. These losses continued in 2018, which has limited the Debtors’ liquidity and impaired their ability to raise capital.”
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