Coach America files Ch. 11 bankruptcy, continues lender discussions

By Caroline Salls

Pittsburgh, Jan. 3 - Coach America Holdings Inc. filed Chapter 11 bankruptcy Tuesday in the U.S. Bankruptcy Court for the District of Delaware to reduce its debt and ensure its long-term competitiveness, according to a news release.

The company said it is continuing talks with lenders on a restructuring "that will position it for future growth and competitive success."

In documents filed with the court, Coach America said its business is operationally sound, but it has suffered from the economic downturn that began in late 2008 and liquidity constraints.

Specifically, the company said debt service requirements, covenant restrictions and increased insurance costs have placed acute pressure on its liquidity, causing it to defer capital improvements.

"Coach America has, for too long, been constrained by our capital structure, and today's decision will ensure a stronger company focused on delivering critical transportation services to our customers across the county," president and chief executive officer George Maney said in the release.

"I want to emphasize that it is business as usual for Coach America throughout the Chapter 11 process, and we look forward to a right-sized capital structure that will enhance our competitiveness and ability to serve our customers going forward."

DIP financing

In connection with the filing, Coach America has obtained a commitment for $30 million of debtor-in-possession financing from a steering committee of its existing senior lenders.

JPMorgan Chase Bank, NA is the administrative agent and collateral agent. J.P. Morgan Securities LLC is the lead arranger.

The company said the DIP financing will support its fleet investment and help ensure the continuation of normal operations.

Interest will be either adjusted Prime rate plus 500 basis points or adjusted Libor plus 600 bps.

The DIP loan will mature on the earliest of nine months from the effective date, 30 days after entry of the interim order if a final order has not been entered and the earlier of closing of a sale of substantially all company assets and the effective date of a plan of reorganization.

The DIP agreement requires the company to file a motion for approval of the bid procedures for a sale of its assets by Jan. 13, obtain a bid procedures order by Feb. 2 and either begin soliciting votes on a plan of reorganization or obtain court approval for an asset sale by May 1.

The company is seeking interim access to $14.83 million of the financing. The interim hearing is scheduled for Thursday.

Debt details

According to court documents, Coach America had $274 million of consolidated assets and $402 million of consolidated debt as of Nov. 30.

The company's largest unsecured creditor is Valerie S. Rybka of Vero Beach, Fla., with a $1.25 million litigation claim.

Coach America's investment banker is Rothschild Inc., legal counsel is Lowenstein Sandler PC, and its financial adviser is Alvarez & Marsal North America LLC.

Coach America is a Dallas-based tour and charter bus operator and motorcoach services provider. The Chapter 11 case number is 12-10010.

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