Background on Greatwide
Greatwide Logistic Services, the largest non-asset based trucking company in the United States, filed a petition for chapter 11 bankruptcy in Delaware on October 20, 2008. By “non-asset based,” Greatwide operates a network of 6,000 independent contractor owner-operators and approximately 20,000 independent third-party carriers. Located in Dallas, Texas, Greatwide provides four primary services: trucking, back-office management to agents who source freight shipments, freight brokers who arrange shipping for customers, and distribution logistics. Trucking and other transportation services generate over 50% of Greatwide’s annual revenue.
Why Greatwide Filed for Bankruptcy
Several factors contributed to Greatwide’s need to file for bankruptcy, increased fuel costs being at the top of the list. Besides the higher cost of fuel, Greatwide’s revenues also suffered due to a significant decline in freight shipments. Having less cash on hand, Greatwide began discussions with its lenders in June of 2008. Ultimately, Greatwide missed an $8 million principal and interest payment due on June 30, 2008. UBS, one of Greatwide’s lenders, issued a notice of default on July 1st.
Greatwide has a first lien credit facility for $370 million, secured by substantially all of Greatwide’s assets and pledges of capital stock. UBS serves as the administrative agent for the first lien facility. Greatwide also has a second lien credit facility of $117 million, also secured by Greatwide’s assets. In addition to the secured first and second tier loans, Greatwide has an unsecured loan with a principal balance of $90 million, plus $24 million owed in interest.
Unexpected Insurance Costs
It is worth mentioning that Greatwide’s unexpected increase in insurance costs may have played a role in its decision to file for bankruptcy. As reported in the affidavit in support of Greatwide’s first day motions, in August of 2008, Greatwide began negotiating a debt restructuring with its secured lenders. During negotiations with its lenders, Greatwide assumed that its insurer would require no more than $5 million in additional collateral coverage in order to renew its workers’ compensation and general liability policies. Instead, the insurer required an additional $32 million in collateral. The required additional collateral, according to Greatwide, “effectively rendered the proposal that hand been under consideration [with its secured lenders] no longer feasible …”
Greatwide lists its five largest unsecured creditors as: UBS ($90mm), Comdata Corp. ($2.5mm), Fenway Partners ($2mm), Pilot Fuel Corp. ($1.4mm), and Primerica Life Insurance Co. ($1.4mm).
Greatwide’s bankruptcy is being presided over by the Honorable Peter J. Walsh.