Ground package delivery company Velocity Express Corp. filed for Chapter 11 bankruptcy protection Sept. 24, according to Bloomberg. Velocity Express listed assets of $94.1 million and debt of $120.6 million as of Sept. 1 in Chapter 11 documents filed in U.S. Bankruptcy Court in Wilmington, DE.
Twelve affiliates — including CD&L, Click Messenger Service, Silver Star Express, Olympic Courier Systems and Securities Courier System — are also seeking protection, Bloomberg reported.
Westport, CT-based Velocity Express plans to restructure under a new owner, ComVest, in a debt-for-equity swap, according to The Journal of Commerce Online. The transaction — a prepackaged Section 363 Chapter 11 sale — will wipe out more than $100 million in debt, Vincent A. Wasik, Velocity’s chairman/CEO, told The Journal.
With annual revenue of about $200 million, Velocity was the seventh largest package/courier company in the 2009 Transport Topics 100 listing of U.S. and Canadian for-hire companies.
According to The Journal of Commerce Online, Wasik and the company’s current management team will remain in place after the sale, and will own a minority stake in the restructured company, as will former bondholders. Velocity will continue operating and expects to complete its restructuring and sale in 30 to 45 days. The company said its employees and contractors will not be affected, and payroll and benefits are guaranteed.
Gerard Hempstead, president of Hempstead Consulting and a former vice president for DHL, says Velocity Express does a lot of mall deliveries for the retail industry and, up to recently, handled some deliveries for Staples. “They are not going away: This is a prepackaged bankruptcy, so the creditors get hurt, but they stay in business and try to navigate to balance the P & L through a difficult economy.”
Velocity is out from under the debt service now, Hempstead notes, but it’s likely that “some shippers will get spooked and look for alternative suppliers like Argix, Dynamex, and Celerity.”