The owner of Nevada-based construction supplier Ahern Rentals Inc. has received a boost in his efforts to maintain control of the company as it works its way through the bankruptcy process.
Ahern, based in Las Vegas and Reno, filed for Chapter 11 reorganization Dec. 22 to restructure some $620 million in debt. It had revenue in the 12 months ended in November of nearly $330 million and is a big player in the Las Vegas economy with some 500 employees.
The company was hurt by taking on debt for expansion before the recession slashed demand for its construction equipment.
U.S. Bankruptcy Judge Bruce Beesley in Reno, who is presiding over the case, on May 1 granted the company’s request for an extension of the 120-day period in which Ahern can exclusively propose a reorganization plan to exit bankruptcy.
The deadline was extended another 120 days to Aug. 20.
That will give owner and CEO Don Ahern and his financial advisers more time come up with a plan and potentially new financing as he tries to maintain control of the company.
A key creditor, Los Angeles billionaire Tom Gores, is believed to be interested in acquiring Ahern by using his stake in Ahern debt to effectuate a takeover, Bloomberg News reported March 22.
Gores is known as a takeover investor. His firm already owns construction supplier Maxim Crane Works, which in 2009 purchased the assets of another industry supplier, Barnhart Crane and Rigging.
Gores’ company Platinum Equity LLC, through affiliate Sphere Capital LLC, holds more than $119 million of Ahern’s $237 million in second-lien note debt, Ahern bankruptcy court records say.
Attorneys for Sphere, while not objecting to Ahern’s exclusivity extension request, said in a court filing that ''there is nothing unique about this case that requires an extended stay in Chapter 11.''
''Sphere is ready, willing and able to partner with the debtor to reach agreement on a path forward that gives maximum value to all stakeholders,'' its attorneys said in a court filing.
Ahern is the seventh-largest firm in the construction rental industry, according to trade publication Rental Equipment Register.
Howard Brown, Ahern chief financial officer, this week said he couldn’t comment on the bankruptcy proceedings. Officials at Gores’ office didn’t immediately respond to a request for comment.
In an April 13 court declaration, Brown said business has been stronger than expected for Ahern as the U.S. economy improves and as customers have stayed loyal to Ahern despite its bankruptcy.
In fact, EBITDA in January came in at $7.6 million vs. the $4.5 million that had been budgeted, he said.
EBITDA is a profitability measure meaning earnings before interest, taxes, depreciation and amortization.
Brown said in the declaration that with the extra time to exclusively propose a plan of reorganization, Ahern would work on addressing liabilities that must be dealt with in the bankruptcy case now totaling $642 million, as well as study what to do with 74 leases around the country used for its branch locations and other operations.
Under the Bankruptcy Code, debtors like Ahern can ask to get out of unprofitable leases.
''During the first months of this Chapter 11 case, most of the debtor’s resources have necessarily been devoted to ensuring a smooth transition to Chapter 11, ensuring the debtor’s access to financing, maintaining uninterrupted operations and evaluating its assets and liabilities,'' Brown said in his filing. "As a result, the debtor has not yet had the opportunity to complete the evaluations which are necessary to the formulation of a plan.''
''The debtor has begun negotiating with various of its creditor constituencies regarding the formulation of its plan,'' he added. ''Debtor is not seeking this brief extension to harass its creditors or as a tactical device. Rather, debtor is proceeding in good faith toward confirmation of its plan."
It’s not yet known whether Gores or other parties will file reorganization plans to compete with Ahern’s once Ahern’s exclusivity period expires.