On Tuesday, the bus company Coach USA revealed that it intends to sell its assets and initiated Chapter 11 bankruptcyproceedings.
Coach USA's Chapter 11 Bankruptcy Filing
Coach USA has approximately 2,070 buses that transport millions of passengers annually across North America. It operates under multiple brands, such as Megabus, Coach Canada, Dilon's Bus Company, Go Van Galder, and Coach USA Airport Express.
According to court documents, the company currently possesses assets valued between $100 million and $500 millionwhile shouldering liabilities amounting to approximately $200 million. In 2019, it filed for bankruptcy protection inDelaware to sell its assets and reduce debt accumulated from a poorly timed private equity acquisition.
Transportation Industry's Challenges Since The Pandemic
The company announced its filing in a press release, citing various factors contributing to the decision, including the impact of the COVID-19 pandemic, which caused the company to halt operations due to lockdowns and regulatory measures frequently.
Even after the pandemic, the company observed that ridership and industry demand remained significantly below pre-pandemic levels. In 2020, ridership plummeted to 90% below pre-pandemic levels; by 2023, it had only recovered to 45%. This substantial decline in ridership led to a 60% decrease in the company's operating revenue in 2020. While there has been a gradual recovery in recent years, with revenue reaching 58% of pre-pandemic levels in 2023, this rebound has been challenged by escalating costs of fuel, insurance, and labor.
The Pandemic's CARES Act
Private equity firm Variant Equity Advisors acquired Coach for $270 million, most of which was financed through debt, which remains on the company's financial records.
Upon entering Chapter 11, Coach had amassed $197.8 million in debt, including $37 million owed on a pandemic relief loan obtained under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, as well as at least $134 million in other outstanding obligations, such as trade debts.
Coach's Sale Agreements Amid Bankruptcy Filing to Save Employees
Coach CEO Derrick Waters stated that buses would continue operating as usual during the company's bankruptcy proceedings, emphasizing their primary focus on safely transporting the millions of passengers who opt for their services each year and maintaining strong relationships with contract customers and transportation agency partners.
Coach already had three sale agreements arranged, each of which is open to better and higher offers. According to court documents, the agreements encompass 16 of Coach's 25 business lines and are anticipated to safeguard jobs for approximately 2,100 employees.
A private investment company named Renco Group is set to acquire the bulk of Coach's assets in exchange for assuming $130 million of the company's debt and specific union contracts. Avalon Transportation is slated to purchase bus lines located in Atlanta, Georgia, and Western states, along with specialized tour bus divisions operated by Coach, for $14.8 million. Meanwhile, ABC Buses will acquire a fleet of 143 double-decker buses for $2.3 million.
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