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The Honolulu Advertiser
Posted on: Wednesday, September 4, 2002

Trucker's shareholders likely big losers

By Gene Johnson
Associated Press

SEATTLE — Consolidated Freightways, one of the nation's largest trucking companies, filed for Chapter 11 bankruptcy protection yesterday, a day after announcing it was ceasing operations and laying off its 15,500 workers.

Consolidated Freightways terminal operations manager Jim Copella, center, spoke with locked-out workers in Tonawanda, N.Y., as the company filed for bankruptcy.

Associated Press

The 73-year-old Vancouver, Wash., firm also released its second-quarter earnings, which detail its dire circumstances. Consolidated lost $123.2 million on revenues of $482.4 million for the three months ending June 30.

The Chapter 11 petition was filed in U.S. Bankruptcy Court for the Central District of California, where some of the company's lawyers are based, spokes-man Mike Brown said last night. Under Chapter 11, Consolidated would sell its assets — 27,000 trailers, 6,600 tractors and most of its nearly 300 U.S. terminals — to pay creditors.

When proceeds are divvied up, it's likely there won't be enough money to go around. The company said that means it won't be able to compensate shareholders stuck with now-worthless stock.

Shareholders typically find themselves out of luck in such bankruptcy proceedings, said Dan Sklar, a Manchester, N.H.-based bankruptcy lawyer with Nixon Peabody LLP.

"Usually companies don't commit suicide until they're hopelessly insolvent, which means they don't have enough money to compensate stockholders," Sklar said.

Analysts said the abrupt closure of Consolidated, which had revenue of $2.2 billion in 2001 and controlled about 15 percent of the domestic long-haul trucking market, could produce short-term turbulence for some of its largest customers, including Home Depot, the U.S. Postal Service and General Electric.

"It will cause some disruption for a couple of days or so," said Thomas Albrecht, a trucking analyst at BB&T Capital Markets. "But these companies have other carriers that they use, and will shift some business to them. They'll also invite new carriers into the fold."

Sklar, who heads Nixon Peabody's bankruptcy practice, said the filing was unusual in that it showed no competitors were interested in buying Consolidated.

"You just don't usually see a company that big, with that kind of debt structure, going right to liquidation," he said.

Sklar suggested two possible explanations: Consolidated's massive financial problems, and the weak state of the industry. By simply letting Consolidated go under, its competitors know they can pick up significant market share without spending the money to acquire the company.

Consolidated lost $36.5 million on $463 million in revenue in the first quarter. It lost $104.3 million last year and $7.6 million in 2000.

Bret Caldwell, a Teamsters spokesman in Washington, D.C., said Monday that Consolidated had faced "some serious management challenges over the past several years." He said chief executive John Brincko was "trying to turn the ship around, but he was just brought in too late to have the real impact he could have had."