EZ Lube, LLC, the Santa Ana, California based quick lube operator, filed for chapter 11 bankruptcy protection on December 9, 2008 in the United States Bankruptcy Court for the District of Delaware. Read the EZ Lube bankruptcy petition here. According to EZ Lube’s Affidavit in Support of First Day Motions, the Debtor operates 82 retail locations, the majority of which are located in Southern California. EZ Lube began with one store in 1988 and implemented a business model whereby it opened new stores on leased property and acquired leasehold interests in all of the assets of the individually run stores. At the time it filed for bankruptcy, EZ Lube employed approximately 1,000 employees including technicians, store managers, cashiers and service crew.
At the close of 2007, EZ Lube had assets valued at $113 million, including $41.4 million in property and equipment. During this same year, EZ Lube experienced a net loss of $44 million. EZ Lube’s liabilities total approximately $114 million, $94 million of which is owed to secured lenders and noteholders.
Events Leading To Bankruptcy
Like many retailers, EZ Lube’s bankruptcy was due in large part to the reduction in consumer confidence and poor economic conditions. When the economy declines, consumers forego oil changes, or select less expensive services. Worse still, higher gas prices resulted in consumers driving less, further reducing the demand for oil changes.
EZ Lube has a large debt load – it currently pays $12 million annually in debt service. Starting in April, EZ Lube began having trouble making its interest payments. As stated in EZ Lube’s Affidavit, EZ Lube’s obligations are "cross-defaulted," meaning that defaults asserted against first lien credit agreements triggered defaults under EZ Lube’s second lien credit agreements.
Objectives in Bankruptcy
Prior to filing for bankruptcy, EZ Lube retained an investment banking firm to assist with the marketing and sale of its assets. EZ Lube seeks a buyer for substantially all of its assets. To that end, it intends to hold an auction of its assets by March of 2009. Read the EZ Lube Sale Motion here.
EZ Lube is represented by Pachulski Stang Ziehl & Jones LLP in this banrkuptcy proceeding. The case is assigned to the Honorable Christopher S. Sontchi. You can read Judge Sontchi’s Chamber Procedures here.