Bankruptcy rears head in commercial trucking
Commercial Chapter 11 filings jumped 62% in May
Multiple trucking companies filed for bankruptcy in the second quarter, signaling a potential surge in charge-offs and other signs of stress in the transportation finance sector.
Commercial Chapter 11 filings totaled 733 in May, up 62% from 453 filings in April, according to legal and compliance services platform Epiq. Including all chapters, bankruptcy filings totaled 49,451 in May, the highest since March 2020, according to Weltman, Weinberg & Reis creditor rights attorney Sara Costanzo, citing G2 Risk Solutions.
The following 13 transportation firms filed for Chapter 11 protection in Q2, according to U.S. Bankruptcy Court documents obtained by Equipment Finance News:
- AZA Transportation, filed May 14 in the Northern District of Illinois;
- Balkan Express, filed April 30 in the Northern District of Texas;
- Best Choice Trucking, filed April 7 in the District of Massachusetts;
- Best Logistics, filed April 7 in the Western District of Tennessee;
- BMX Transport, filed May 20 in the Northern District of Georgia;
- Elite Carriers, filed May 21 in the Eastern District of Wisconsin;
- Kadam Logistics, filed April 4 in the Northern District of Illinois;
- KPower Global Logistics, filed May 8 in the Western District of Tennessee;
- LML Logistics, filed April 25 in the Middle District of Florida;
- NAS Logistics, filed May 27 in the Northern District of Texas;
- Nortia Logistics, filed June 9 in the Northern District of Illinois;
- Starr Rail, filed April 11 in the Northern District of Texas; and
- Sweet Trucking, filed April 11 in the Eastern District of Tennessee.
Recent freight bankruptcies can be attributed to economic turbulence, expiring small business relief funds stemming from the pandemic and financial hardship among the customers that truckers serve, ACT Research Vice President Steve Tam told EFN.
“It really has to do more with who those trucking companies’ customers were and the businesses they were in,” he said. “So, it’s the underlying business that they’re supporting that’s actually failing, and as a result, if I got all my eggs in one basket, I’m in trouble.”
Headache for lenders
The number of pieces of equipment affected by the recent bankruptcies appears to be greater than usual, Tam said. Thus, collateral is poised to play a large role as creditors negotiate with debtors.
Digital Federal Credit Union, for one, has more than $860,000 in unsecured claims tied to six Peterbilt trucks financed to Best Choice Trucking in Massachusetts, whose filing also shows Midcountry Bank is owed nearly $240,000 on a 2020 Peterbilt.
Meanwhile, in the AZA Transportation case in Northern Illinois, Keystone Equipment Finance has nearly $83,000 in unsecured claims on three trucks, and Transportation Alliance Bank is owed more than $67,000 on two trucks.
