Commercial truck parts manufacturer, Accuride Corporation, recently filed for Chapter 11 bankruptcy protection. This move came as the company faced significant financial challenges due to a downturn in the U.S. freight industry, which has also affected truckers and other parts suppliers.
Why did accuride file for bankruptcy?
Accuride, a firm manufacturing wheels and wheel-end parts for commercial vehicles, has been experiencing some financial challenges over the past few years. With total liabilities ranging from $500 million to $1 billion, the company was greatly affected by a recession in the freight industry, causing a drop in its orders. As early as July, S & P Global Ratings further issued a warning that the combination of poor orders would eventually culminate in a default or a restructuring of the organization.
It is not the first time the corporation has had financial issues. Accuride previously filed for bankruptcy in 2009 due to the previous global recession but was able to bounce back and keep its business running. Nonetheless, the ongoing slump in the freight market characterized by high levels of wastage of resources and low demand for shipping has once again put the firm at risk.
The role of crestview partners
Accuride has been owned by Crestview Partners, a private equity firm, since 2016. Last year, Accuride’s lenders agreed to provide additional financial support, giving the company more time to pay off its debts. Despite this assistance, the ongoing challenges in the freight industry have made it difficult for the company to regain its financial footing.
Crestview Partners’ involvement in helping Accuride refinance its debt last year offered some temporary relief, but the continued decline in demand for commercial vehicle parts ultimately led to the Chapter 11 filing.
What happens next?
Accuride continues to remain optimistic over its intentions of emerging from Chapter 11 bankruptcy within the space of 90 to 100 days. The company has been able to come to a deal with its lending institutions to make changes on how it carries its business in North American countries. Such restructuring is deemed to alleviate the debt burden of the company greatly to concentrate on recovery of the business.
In a bid to ensure the continuity of operations during this period, Accuride has arranged for a $30 million injection of funds. This will allow all of its facilities to function as normal and customers to who require parts and services to receive them uninterrupted.
Impact on international operations
While Accuride’s U.S. business has been deeply affected, the company’s operations in other regions are less impacted. Its subsidiaries in Mexico, Europe, and Asia are not included in the bankruptcy filing. However, the Canadian arm of Accuride has also started creditor protection proceedings and is working on its own restructuring plan.
What does this mean for the industry?
The recent bankruptcy case of Accuride is one out of the many unfortunate financial woes afflicting the freight sector. The dismal economic trends prevailing within the sector have hindered not only transport service providers but also the rest of the suppliers who are responsible for providing important parts and materials. This might mean that with the way the industry is trying to adapt to the existing market environment, in the next few months some other companies may also find themselves in such problems.
To sum up imposes that while the outlook is unclear for Accuride Co, restructuration measures are being undertaken aimed at debt reduction in a bid to recover and rise above the chapter eleven filling.
