Coach USA, the largest privately owned bus company in the United States, recently filed for Chapter 11 bankruptcy in order to sell off its business assets. The company cited “significant challenges” as a result of the COVID-19 pandemic, which has led to a decline in ridership and demand in the industry.
Chapter 11 bankruptcy allows a company to reorganize and continue operations while paying off creditors over time. It also provides the opportunity for the company to borrow money with court approval. Coach USA estimates that it has between 1,000 and 5,000 creditors, and its assets and liabilities are estimated to be in the range of $100 million to $500 million.
As part of the bankruptcy process, Coach USA has entered into asset-purchase agreements with Bus Company Holdings US (BCH US) LLC and affiliates of AVALON Transportation LLC. BCH US will take over some of Coach USA’s bus lines, including Dillon’s, Elko, Megabus Retail, Montreal, Olympia, Rockland, and Suburban. AVALON affiliates will acquire Lenzner, Kerrville, All West, and ACL Atlanta bus lines. The company is also pursuing “value-maximizing going concern sales” for its remaining segments and assets.
These proposed transactions are expected to preserve thousands of jobs and ensure uninterrupted transportation services for millions of passengers throughout the United States and Canada. BCH US and AVALON are acting as “stalking horse” bidders in the sale processes, setting the floor price for potential auctions.
To support its operations during the bankruptcy proceedings, Coach USA has secured debtor-in-possession (DIP) financing, which provides the company with a $20 million cash infusion. This financing allows Coach USA to continue funding its operations while the bankruptcy progresses in court.
The bankruptcy filing by Coach USA is part of a larger trend of companies facing financial difficulties. In the first quarter of 2024, overall commercial bankruptcies in the United States rose by 22 percent compared to the same period in 2023. Chapter 11 bankruptcies specifically increased by 43 percent during this time.
Factors contributing to the increase in bankruptcies include higher costs of funds and interest rates, reduced consumer discretionary spending, higher housing costs, and a drawdown of excess savings. Despite these challenges, some experts maintain a positive outlook for the American economy, with expectations of growth in consumer spending, investment, government spending, and exports.
In May alone, there were 62 new corporate bankruptcy filings in the United States, bringing the total to 275 bankruptcies so far this year. The consumer discretionary sector had the highest number of filings, followed by healthcare and industrials.
While the bankruptcy filing by Coach USA is a setback for the company, the sale processes and financing arrangements in place aim to preserve jobs and ensure continued service for passengers. The broader economic landscape may present challenges, but there are also opportunities for growth and recovery.
