ComVest, Wayzata Vie to Be ‘Stalking Horse’ as Gainey Corp. Bankruptcy Enters 2nd Year
This story appears in the Oct. 5 print edition of Transport Topics.
The Gainey Corp. bankruptcy case, the longest-running reorganization among large carriers, will enter its second year on Oct. 14 when a top bidder for the trucker is scheduled to be announced, setting the stage for an auction.
Gainey now is negotiating with ComVest and Wayzata Investment Partners, two private equity firms that seek to become a so-called “stalking-horse” bidder at the auction scheduled for Oct. 28, CEO Harvey Gainey told Transport Topics on Oct. 1. Three other bidders have been eliminated, he said.
The date for announcing the stalking-horse bidder is the first anniversary of the company’s filing, which followed a dispute with its lenders about the use of company funds. Gainey, Grand Rapids, Mich., is No. 73 on the Transport Topics 100 list of the largest U.S. and Canadian for-hire carriers, with $300 million in sales last year.
“We are down to the final two,” Gainey said. “The parties are bidding the price up. Until someone stops the process, it is not going to stop. The lenders and us want the price to be as high as it possibly can be.”
Provisions of the bankruptcy law that Gainey is using to reorganize will give the company that isn’t the stalking-horse bidder a chance to enter a higher offer at the auction.
Gainey filed for bankruptcy after Wachovia Corp., now part of Wells Fargo Inc., and other lenders sued the trucker in a state court for $238 million, seeking to cancel the company’s credit line on grounds the funds were misused and not repaid when due. The trucker has denied any wrongdoing.
ComVest last month agreed to take an 80% stake in package carrier Velocity Express Corp. in a debt-for-equity swap linked to a bankruptcy filing by Velocity on Sept. 24.
After Gainey’s filing, creditors at first sought to liquidate the company, whose revenue declined 25% from 2007. Gainey subsequently reached an agreement with lenders and unsecured creditors on a sale that could have given creditors about 30 cents on the dollar of debt by selling some Gainey trailers and tractors.
That $105.1 million sale plan would have given investor Najafi Companies, Phoenix, an 80% stake in the motor carrier; Harvey Gainey would have kept a 20% interest. That offer was a mixture of cash and commitments by Najafi to provide added funding later.
When Bankruptcy Court Judge James Gregg raised questions about the plan, it was replaced by a different approach that brought in a total of five written, all-cash bids.
Without saying how much the initial bids were, Gainey said the amount of the bids has risen about 25% so far.
Gainey said he would retain a percentage of ownership no matter which company was selected as the winning bidder. He declined to say how much his interest would be.
At present, Gainey and his family are the sole owners of the company, which operates four truckload carriers, including Gainey Transportation and Super Service. Gainey also offers less-than-truckload and brokerage services.
