Despite reports that the Great Freight Recession is ending, more major trucking companies have been heading for bankruptcy court.
The trucking, shipping, and logistics sector has been entrenched in a recession since about March 2022, which has led to financial distress among these transportation companies, forcing many to file for bankruptcy and some to shut down.
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Signs that truckers are becoming more discriminating with who they do business with, as well as rising truckload rates, have been good news to the industry bringing hope that the recession might be ending.
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Bankruptcy filings by trucking companies will need to slow down significantly, however, for the industry to be convinced the recession is over.
The list of recent trucking and shipping companies filing for bankruptcy includes Miami, Fla.-based Star Transportation PA and five affiliates that filed for Chapter 11 bankruptcy on Nov. 1 to reorganize their businesses after one of the company’s lenders issued an order to repossess 47 of its trucks for which it had provided financing.
Defunct Illinois shipping company Mighty Move Transportation, which operated with 70 power units and 75 drivers, on Oct. 24 filed for Chapter 7 liquidation in the U.S. Bankruptcy Court for the Northern District of Illinois, facing two breach of contract lawsuits.
Also, Irving, Texas, logistics company Sunset Logistics and its affiliates on Oct. 3 filed for Chapter 7 bankruptcy to liquidate their assets and cease operations blaming a bad economy, low freight rates, and rising costs.
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KAL Freight to wind down affiliates in Chapter 11 bankruptcy
And now, major trucking and shipping services company KAL Freight on Dec. 5 filed for Chapter 11 protection to wind down failing affiliates and restructure its primary business.
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The Fontana, Calif.-based transportation and logistics company filed its petition in the U.S. Bankruptcy Court for the Southern District of Texas in Houston after defaulting on debt owed to about 10 lenders.
The debtor, which is 100% owned by Kalvinder Singh, listed $100 million to $500 million in assets and liabilities, including about $313 million prepetition funded debt.
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Three Canadian entities owned by Singh – Big Rig Trailers & Leasing Inc., Big Rig Tires & Services Inc., and Big Rig Partz Inc. – were placed into receivership on June 21, 2024, in Canada under the Canadian Bankruptcy and Insolvency Act.
Owner’s Canadian entities file for Chapter 15 protection
Receiver Grant Thornton on Sept. 6 filed for Chapter 15 protection in the U.S. Bankruptcy Court for the Central District of California, seeking recognition of the receivership as a foreign main proceeding.
The Canadian proceedings do not affect the KAL Chapter 11 case, according to the declaration.
KAL’s largest unsecured creditors include CIMC Reefer Trailer Inc., owed $12.7 million; Shayla S. Davis Cain Law Office, owed $3 million; All Solutions Insurance Agency, owed $1.3 million; and Continental Tire The Americas, owed $1.1 million.
The debtor, founded in 2014, had merged operations with other trucking-related companies in 2020 that became unsuccessful business ventures, according to a declaration from the company’s Chief Restructuring Officer Bradley D. Sharp of Development Specialists Inc.
The company, which had 800 trucks, 800 drivers, and more than 2,200 trailers on the petition date, operated its trucking company KAL Freight, trailer distributor and retailer KAL Trailers, commercial tire dealer KVL Tires, and truck and trailer parts company KAL Partz. The company also owned KAL Aviation, a company with no assets and operations.
KAL invested heavily in trucks and trailers because of high demand during the Covid-19 pandemic. Once the pandemic subsided, the company was overleveraged and could not meet its financial obligations. The KAL Partz, KAL Tires, KAL Trailers, and KAL Aviation ventures were unsuccessful and a drain on profits, which led to disputes with the company’s partners.
The debtor had difficulty generating sufficient business as the commercial transportation industry entered a pronounced downturn after the Covid-19 pandemic, facing a glut of trucks and drivers in the U.S.
The debtor has not filed a motion seeking debtor-in-possession financing, but it has filed motions for use of its cash collateral and to continue operating under its factoring and security agreement with Triumph Business Capital.
The debtor plans to reorganize and restructure its business in Chapter 11 and wind down KAL Partz and KVL Tires.
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