Even as other units of bankrupt Comcar Industries Inc. have been sold off, the fight over the sale of assets to a group headed by the company’s former chairman continued to drag on in a round of court filings last week.
In a Thursday court filing, Commercial Warehousing Inc., a subsidiary of CWI Logistics (CWI), and former Comcar chairman Mark Bostick sought to clarify their offer for CWI’s proposed purchase of two of Comcar’s business units — bulk carrier CCC Transportation and CTTS Repair.
In May, the Auburndale, Florida-based trucking holding company announced it filed for Chapter 11 bankruptcy protection. The court-supervised, pre-packaged bankruptcy was designed to liquidate the company by selling its five trucking subsidiaries. Three of the company’s units — flatbed carrier CT Transportation, chemical carrier CTL Transportation and refrigerated and dry van over-the-road carrier MCT Transportation — had named buyers in the May 17 filing.
The petition also stated that Comcar had letters of intent for the sale of CCC and CTTS.
Sale of CCC and CTTS hits snag
The sale of CCC and CTTS to CWI has been opposed by the unsecured creditors committee citing conflicts including Bostick being a former insider with the now failed company; Bostick’s control of CWI and its collective claim to certain assets operated by Comcar; and the allocation of consideration in the deal.
Comcar and creditors filed a joint motion last Monday to withdraw the sale motion, to terminate the purchase agreement and to cease operating CCC and CTTS.
Creditors initially valued the letter of intent, a deal in which Comcar would transfer CCC and CTTS along with real estate valued at more than $4.4 million to CWI. In exchange, Comcar would receive used trailers that creditors valued at around $1 million. The creditors also questioned the proper ownership of the trailers that are already tied to a lease agreement to Bostick through CWI and subleased to CTTS. The committee concluded the proposed transaction was “reminiscent of Tom Sawyer’s swindle.”
Further, Bostick and Comcar still have an unsettled dispute regarding an agreement over debt for equity and real estate rights.
CWI and former Comcar chairman see the deal differently
In its response to the joint motion, CWI maintained that the offer has been “improved” in recent proposals and that the creditors are not accurately conveying the value of the transaction to Comcar. “It appears that the Debtors are mistaken in accepting the Committee’s apportionment of consideration flowing in the CCC/CTTS Sale Motion as it is currently structured.”
CWI asserted the creditors aren’t properly valuing the CCC trailers that are listed with a consideration of $3.9 million. Further, CWI contends the funds distribution procedure in the CTL sale order establishes CWI as having a right to CTL’s trailers.
CWI said it has established clear rights to the CTL equipment and that Comcar made “efforts to stymie transfer of title to the Equipment to CWI.” CWI said that now that it “has physical possession of the titles preventing their further transfer” it has established a clear stake in the CTL assets listed at $3.5 million in consideration according to the CTL sale order. CWI believes the fair market value of those trailers equals or exceeds that amount.
In advocating for the CCC and CTTS transaction to proceed, CWI said the sale of those units would result in Comcar receiving the $4.5 million in escrowed funds. If not, CWI believes the bulk of those funds would belong to them.
The purchase agreement allocates a total consideration of $8.8 million to CWI with $10.3 million to Comcar. The creditors’ take on the transaction is that CWI would walk with $12.3 million, including both the trailer fleets of CCC and CTL, leaving Comcar with only $3 million. CWI contends that if the deal were to comply with the CTL sale order, with CWI getting the CCC fleet and Comcar getting the CTL fleet, CWI would receive $8.8 million and Comcar $6.4 million.
If no transaction transpires, Comcar would get $11.2 million, according to the creditors, but CWI believes it would receive $10.8 million in that scenario, with Comcar only seeing $2.4 million.
With regards to the master equipment lease being a “disguised financing transaction,” CWI does not concede this or the status of title.
CWI contested that Comcar sold the equipment to CWI in August 2015, for which CWI paid approximately $9.8 million in sale proceeds. CWI said Comcar used the funds to pay the lender, which has been a 90% shareholder in Comcar since 2016. CWI said it took physical possession of the titles in 2019 and that Comcar sold some of the assets without their consent and hasn’t paid for re-titling costs, which it estimates to be $750,000.
CWI said the creditors’ assertion that CWI’s leasehold interest in the assets is “disguised financing,” would make CWI a secured lender and that the creditors would view them as having an unperfected, or potentially invalid, lien on the assets. “Therefore, if you assume CWI is an unperfected lien creditor as to the Equipment and reapportion the consideration flowing from the transaction, the Debtors are better off abandoning the deal.”
“As to perfection, the status of the title to the trailers has been known to the Debtors for months, if not years. CWI’s continued attempts to have titles to the trailers transferred to CWI in accordance with the bill of sale ran into delay and refusal to comply by the Debtors,” the response continued.
“If the Debtors believe their fiduciary duty requires them to terminate the Purchase Agreement and incur the costs of winding down CCC and CTTS rather than consummating the Purchase Agreement, that is their choice. But they should only fulfill that duty based on accurate information. Either way, CWI reserves all of its rights against the Debtors, Committee, and others, in this or any other court.”
Recent Comcar bankruptcy sales
The planned sale of CT Transportation to PS Logistics was met by a bidding war with Canada’s largest transportation and logistics company TFI International (NYSE: TFII) ultimately winning out. TFI subsidiary Bulk Transport Company East’s final bid of $15 million for CT was the clincher. The initial bidding began with PS Logistics’ $8.7 million offer.
At the time of the bankruptcy filing, Comcar was one of the nation’s largest privately owned transportation companies with more than 40 terminals throughout the U.S.
The filing listed the company’s assets at $66.7 million, with $85.6 million in liabilities ($46.3 million of which was listed as long-term liabilities), presumably leaving the company with nearly $40 million in liabilities due within one year.
According to a declaration submitted by the officer overseeing the company’s restructuring, Comcar was reported to have lost $25 million in 2019 and $6 million through the end of March.
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