Trailer Bridge is over troubled water, as the marine and trucking freight giant founded by the legendary “Father of Containerization” has entered Chapter 11 bankruptcy.
Three weeks after losing its CEO and one day after missing an $82.5 million debt payment, the Jacksonville, FL-based shipper filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code in a Florida court.
Trailer Bridge was founded in 1991 by Malcom P. McLean, then 78, whose invention of the metal shipping container revolutionized the global freight industry.
|Trailer Bridge Inc., an intermodal freight service, missed an $82.5 million debt payment this week.|
In a statement, Trailer Bridge said it believed that the bankruptcy filing was “the quickest and most efficient way to restructure its balance sheet and ensure the long-term strength of its operations.”
“The Company hopes to complete this reorganization by the end of the first quarter of 2012, and will work closely with its existing debt holders to emerge quickly from Chapter 11.”
Subject to court approval, the company has secured $15 million in debtor-in-possession (DIP) financing to maintain its sailing schedule and current level of service, while financing its Chapter 11 proceedings.
Trailer Bridge said it did “not expect any significant or unusual reductions in overhead,” would meet its commitments to employees and suppliers, and would “continue its regular vessel deployment and sailing schedule” during reorganization.
The company provides multiple weekly U.S. Flag sailings between Jacksonville and San Juan, Puerto Rico; weekly sailings between Jacksonville and the Dominican Republic; and weekly inter-island service between Puerto Rico and the Dominican Republic.
‘Not an Easy Decision’
"While not an easy decision, we are confident that restructuring our business and capital structure will allow us to continue to provide reliable, uninterrupted service to our customers,” co-CEOs William G. Gotimer Jr. and Mark A. Tanner said in a joint statement.
“With the average age of our vessel fleet of 16 years and use of 53-foot high-cube containers, Trailer Bridge offers the most modern ocean freight transportation system in the Caribbean. In recent weeks, we have seen significant volume increases in our southbound freight service and increased revenue.
“We believe that the efficiencies and service we offer shippers will become increasingly important to shippers in the coming months and years."
The bankruptcy decision was not unexpected. Trailer Bridge had already received two extensions on the debt payment, and the shipper is in “a precarious financial situation,” the Jacksonville Business Journal reports.
Former CEO Ivy Barton Suter resigned from the shipping company on Oct. 21. She had been the company’s third CEO since 2008, when John McCown resigned without explanation.
“They waited too long to make some strategic changes,” Charles Clowdis, managing director of transportation consulting for Colorado-based IHS Global Insight, told the Business Journal.
|Ivy Barton Suter was the company’s third CEO since 2008. She resigned in October.|
The company’s bankruptcy filing lists $102.7 million in assets and $118.1 million in total debt. Its 20 largest unsecured creditors include Suter, the Jacksonville Port Authority, and CSX Corp.
Trailer Bridge’s stock traded at $3.95 in February but fell below $1 after filing its midyear report in August. In October, NASDAQ notified the company that it could be delisted if the stock did not return above $1 by April.
On Tuesday, Trailer Bridge (“TRBR”) closed at 33 cents; on Wednesday, after the bankruptcy announcement, it skidded to a low of 13 cents.
Looking Back, and Ahead
Chapter 11 of the U.S. Bankruptcy Code allows companies to continue operating while managing their assets. Congress enacted the law to help companies avoid liquidation, preserve their value, and satisfy creditor claims.
It is a path that Trailer Bridge’s storied founder knew well.
Fresh out of high school, McLean managed to build the nation’s second-largest trucking firm from a single pick-up. When regulations prohibited him from buying a shipping company while owning the trucking company, McLean sold the latter for $25 million.
The new McLean Industries (later, Sea-Land Service Inc.) took shipping and containerization to levels never before seen. Over time, the company acquired two converted World War II T-2 tankers; five SL-7 class vessels, then among the world’s largest, fastest containerships; 27,000 trailer-type containers; 36 trailer ships; and access to over 30 port cities.
|Trailer Bridge founder and shipping container pioneer Malcom P. McLean was “one of the few men who changed the world,” according to Forbes Magazine.
In 1969, McLean sold Sea-Land to Reynolds Tobacco Co. for $530 million; McLean made $160 million from the deal and was eventually named "Man of the Century" by the International Maritime Hall of Fame.
In 1982, McLean made the Forbes 400 Richest Americans list with a net worth of $400 million; unfortunately, he also then gambled unsuccessfully on rising oil prices and ended up filing for bankruptcy with $1.3 billion in debt several years later.
Still, Trailer Bridge is optimistic that it can survive its current troubles, said its bankruptcy attorney, Gardner Davis.
“Trailer Bridge has a strong core business,” Davis told the Financial News & Daily Record of Jacksonville. “It remains business as usual.”