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Small carrier’s bankruptcy spells out need for factoring

In lawyer’s plea to court, she says needed cash “doesn’t generate itself”; company’s factoring lender is Triumph

John Kingston
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A small Midwest trucking company has filed for chapter 11 bankruptcy protection. (Photo: Shutterstock)
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Key Takeaways:

  • H5 Transport, a small North Dakota trucking company, filed for Chapter 11 bankruptcy.
  • The company's bankruptcy is attributed to cash flow challenges in a weak freight market, relying on factoring to pay drivers and operational expenses.
  • H5 Transport lists assets between $100,001 and $500,000 and liabilities between $1,000,001 and $10 million, with approximately 24 creditors.
  • Despite the bankruptcy filing, H5 Transport continues operations.
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H5 transport, a North Dakota-based truckload and LTL carrier, has filed for bankruptcy protection under chapter 11 of the Federal Bankruptcy Code.

It continues to operate, according to the court documents filed with the U.S. Bankruptcy Court for North Dakota.

According to the company’s data available through the Federal Motor Carrier Safety Administration, H5 is a relatively small carrier. Its record lists 10 power units and three drivers. Its headquarters is in Oakes, North Dakota. 

In a document filed with the court by Christianna Cathcart of The Dakota Bankruptcy Firm, the attorney representing H5, she described the company as “a small, owner-operated trucking company that relies on independent contractor drivers who are paid weekly for the prior week’s miles.” That statement was made in a request to the court to allow a factoring agreement with Advance Business Capital, which previously changed its name to Triumph Business Capital. Triumph Business Capital now operates under the trade name Triumph, which is a d/b/a of TBK Bank, SSB, a division of Triumph Financial, Inc. (NASDAQ: TFIN).

The letter is blunt about what factoring means to H5, a situation that is likely to be found at  other small trucking companies trying to survive in the current weak freight market. 

“The cash required to pay drivers, fuel vendors, insurance premiums, and taxes does not generate itself,” the letter from Cathcart says. “Just as trucks do not dispatch themselves, receivables do not convert into usable funds without a functioning system in place.”

That system, she adds, is its factoring agreement with Triumph Financial subsidiary, the attorney adds.

Forty nine creditors listed

The bankruptcy filing lists one to 49 creditors, estimated assets of $100,001 to $500,000, and estimated liabilities of $1,000,001 to $10 million.

The actual list of creditors filed with the court totals 24. It includes Triumph Business Capital and Advanced Business Capital, the U.S. Small Business Administration and technology provider Motive Technologies.

The company’s website says H5 was founded in 2018 by Army veteran Lonnie Helgerson. Besides the headquarters in North Dakota, it has a satellite office in Bradenton, Florida.

H5, according to the website, has contracts with 3M Co, Bayer Crop Services, Whirlpool “and many others.” It says it has dedicated lanes between North Dakota and South Dakota and the Illinois/Indiana region. 

H5’s Out of Service out of service (OOS) data shows it to have a slightly higher OOS rate than the national average as of the end of August. But the numbers are small: 12 inspections in the prior 23 months resulted in 4 OOS notices, for a 33.3% rate, versus a national rate of 22.3%. Its driver OOS rate was 6.7% compared to a national rate of 6.67%.

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John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.