Trailer Bridge Inc.’s fast track out of bankruptcy has hit a speed bump as the Jacksonville-based marine and truck company still hasn’t filed its Chapter 11 reorganization plan.
But the company is hoping to soon file a plan that will satisfy all of its stakeholders — maybe even its stockholders.
At a hearing in mid-December in U.S. Bankruptcy Court in Jacksonville, one of Trailer Bridge’s attorneys, Gregg Galardi, outlined a fast-moving timetable that would have Trailer Bridge out of Chapter 11 by early March, four months after initially filing for bankruptcy.
That timetable included Trailer Bridge filing its reorganization plan before Christmas, but that didn’t happen.
With Trailer Bridge still negotiating the plan with its creditors, it doesn’t look like it can complete the plan before March.
But another attorney for the company, Gardner Davis of Foley & Lardner in Jacksonville, expects the plan to be completed soon.
“The company is working very closely with the
bondholders and the creditors committee and our goal is to have a plan shortly that enjoys everyone’s support,” Davis said last week.
One group that doesn’t have a say in the negotiations is Trailer Bridge’s shareholders. Galardi said at last month’s hearing that the company hopes the plan does have some “recovery” for stockholders.
Shareholders generally have very little choice in a bankruptcy case. They are last in line to receive anything, after all the other creditors are paid off. If there isn’t enough money to pay off all of the company’s debts, shareholders get nothing.
That’s what happened to Winn-Dixie Stores Inc. shareholders when the supermarket chain went through a Chapter 11 reorganization in 2005-06.
That usually has shareholders crying foul (and I certainly heard a lot of that from Winn-Dixie shareholders back then).
Stockholders often don’t grasp the meaning of their shares in a company. Those shares make them the owners of the company and as owners, they are responsible for paying off the company’s debts.
Although they may think otherwise, they aren’t entitled to anything when the company goes bankrupt.
American Body Armor was a big winner
Sometimes, the situation can turn out well for shareholders in a bankruptcy.
Among Jacksonville companies, the best example of that was bullet-proof vest maker American Body Armor & Equipment Inc.
American Body Armor emerged from Chapter 11 in 1993 under a plan in which existing shareholders retained 30 percent of the company and were given one share of stock for every three they owned. New stock was issued to creditors representing 70 percent of the company.
American Body Armor’s stock was worth 18 cents a share as the company emerged (after the one-for-three exchange), but the company had already turned profitable even before it emerged from bankruptcy. The situation looked promising.
Under new management, American Body Armor emerged into a more diversified manufacturer of police and military equipment and changed its name to Armor Holdings Inc. It became well-known internationally as it acquired some high-profile businesses, including a company that made armor for Humvees used by the U.S. Army in Iraq in the early 2000s.
Armor Holdings eventually was bought out by British defense firm BAE Holdings Inc. for $88 a share in 2007.
That was about 488 times the stock price when it emerged from bankruptcy in 1993.
Winn-Dixie, Koger shareholders were losers
There aren’t many bankruptcy success stories (at least as far as shareholders are concerned) like American Body Armor.
Winn-Dixie’s reorganization may turn out to be a success for the company as it moves toward its planned merger with Bi-Lo LLC.
But the original Winn-Dixie shareholders were wiped out when the company emerged from bankruptcy. The current stock, which will be purchased by Bi-Lo, consists of new shares that were issued to creditors when the company emerged from bankruptcy in 2006.
Another prominent Jacksonville company that basically wiped out its shareholders during Chapter 11 was Koger Properties Inc.
The company and its founder, Ira Koger, pioneered the concept of developing suburban office parks in the 1950s. But the company collapsed in the 1990-91 recession.
Koger Properties emerged from bankruptcy by merging with a sister company, Koger Equity Inc., in 1993. All that shareholders got out of the deal were warrants to buy one Koger Equity share at $8 each for every 50 shares of Koger Properties they owned. That’s really not much.
And then there’s Charter
The most interesting Jacksonville bankruptcy story has to be The Charter Co., which did give something back for stockholders.
If you’ve only lived in Jacksonville for 20 years or so, you may not have heard of Charter. It was one of the largest U.S. corporations of the early 1980s with a wide range of business interests including publishing, insurance and banking.
Have you noticed the Downtown Jacksonville building with the circular top that used to be a revolving restaurant? It’s now the JEA building. That was Charter’s headquarters.
The company’s biggest business was oil, and a collapse of oil prices sent Charter spiraling into Chapter 11 in 1984.
Charter sold off most of its businesses and finally emerged from bankruptcy in 1987 by issuing stock to creditors, but existing shareholders retained 49.5 percent of the stock.
Charter ended up using the proceeds from selling off its other businesses to acquire control of Spelling Entertainment Inc., the Hollywood company that produced television shows such as “Beverly Hills 90210” and “Melrose Place.”
Charter changed its corporate name to Spelling Entertainment in 1992 and was eventually sold to Viacom Inc. in 1999.
Charter’s stock traded as high as $50 as its business peaked in 1979 but fell to $1 when it went through bankruptcy. Viacom paid $9.75 a share to buy out Spelling, so longtime Charter shareholders did receive something.
Trailer Bridge’s stock, which traded near $4 a year ago and above $10 three years ago, was priced below 10 cents a share for most of December after the Chapter 11 filing.
Trailer Bridge’s reorganization plan, even if it lets shareholders keep their stock, could very well end up diluting the value of the stock by issuing new additional shares to creditors.
But at least, as in the case of Armor and Charter, it would give shareholders the opportunity to make money if the company turns around.
The company late in December filed its first monthly operating report in bankruptcy court, covering the period from when it filed Chapter 11 on Nov. 16 through Nov. 30. It shows Trailer Bridge had revenue of $5.3 million and a net profit “before reorganization items” of $171,124 in that period.
The reorganization items, which include professional fees and “contingency planning costs,” left Trailer Bridge with a final net loss of $954,659 in that period.
The data at least give hope that the company can emerge profitably from Chapter 11 when it does get the plan filed and confirmed by the court.
Three more years for Landstar CEO Gerkens
Landstar System Inc. filed a report with the Securities and Exchange Commission last week that suggests that Henry Gerkens will remain CEO of the Jacksonville-based trucking company for three more years.
The filing shows that Landstar entered into a new employment agreement with Gerkens that says he will continue as CEO through Jan. 3, 2015, and then become executive chairman. Gerkens is currently chairman of Landstar’s board, in addition to his role as CEO.
The filing does not say anything about a potential CEO successor in 2015.
Flat holiday for Stein Mart
Stein Mart Inc. last week reported a flat holiday sales season.
Total sales for the five weeks ended Dec. 31 fell 0.2 percent to $166 million and comparable store sales were unchanged in the holiday period.
The Jacksonville-based fashion retailer had 262 stores in operation at the end of the year, compared with 264 at the end of 2010.
Stein Mart said December sales were better in California, Texas, the Midwest and Northeast, while sales were weaker in Florida and the Gulf Coast region.
Competitor sues FIS
Fidelity National Information Services Inc., or FIS, is facing a patent infringement lawsuit from its biggest competitor.
Wisconsin-based Fiserv Inc. announced last week that two of its subsidiaries are suing Jacksonville-based FIS and its Metavante Corp. subsidiary.
Both FIS and Fiserv provide technology services for financial institutions.
Fiserv said in a news release that the lawsuit alleges “FIS infringes on Fiserv’s patents when it provides customers with certain financial and payment solutions.”
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