The future of Ahern Rentals, Las Vegas, remained unresolved as the company spent 2012 under the specter of bankruptcy proceedings, which were marked by four extensions given by the court for Ahern to present a plan to reorganize its debt and a Dec. 7, 2012, decision to allow creditors to present their own plans.
Judge Bruce Beesley rejected Ahern’s Nov. 30 proposal to let two sets of lenders, who hold $379.2 million in debt, a choice between accepting a discounted lump sum payment or receiving repayments over a longer period than specified in the initial loan agreements.
The judge said the plan did not follow the “absolute priority rule,” which states that unless all creditors are repaid in full, owners must face a loss. Beesley then gave Ahern Rentals until Dec. 7, 2012, to present a new plan, which the company was unable to do, therefore Ahern’s exclusivity period ended and creditors were free to present to the court their own plan or plans for reorganizing the debt.
At presstime in mid-December, no other plans had been presented and no further action had been taken. However, attorneys for Ahern indicated they would appeal Beesley’s ruling, stating the determination that their plan fell short of legal standards was premature and likely wrong, but the judge refused to further delay the case for the outcome of that appeal and told creditors they were free to present their plans to the court.
The company, which is one of the largest family-owned rental businesses in the U.S., announced on Dec. 22, 2011, that it had filed a voluntary petition for Chapter 11 reorganization in the United States Bankruptcy Court for the District of Nevada in Reno, Nev. The company also said it had reached an agreement with existing lenders for debtor-in-possession (DIP) financing with about $50 million of availability, which was later approved by the bankruptcy court.
The company filed for Chapter 11 because it was unable to extend the maturity of its revolving credit facility, which had a maturity date of Aug. 21, 2011. Since the maturity, the bank continued to fund the company and negotiate the extension of the revolving credit facility without the necessity of a bankruptcy filing. Ahern said it has been forced to seek bankruptcy protection to address the maturity of its revolving credit facility, despite that about 90 percent of the company’s lenders would have consented to an extension.
Don Ahern, CEO and owner of 97 percent of the company, said at that time, “We have been experiencing a significant improvement in our business, with a substantial increase in our utilization levels and improved margins. The company provides a valuable service for its customers, and we do not expect the bankruptcy filing to affect our ability to continue to offer customers highly reliable and quality equipment and service.”
Since the 2008 economic downturn and subsequent crash in the construction business in Las Vegas, Ahern has had to lay off 400 employees, sell off 3,000 pieces of equipment and has moved three-quarters of its Las Vegas equipment out of the city. The company has opened 35 new branches outside of Nevada since 2010, but the company reported improvements throughout 2012 and was able to operate and meet its day-to-day obligations with improved cash flow and its DIP financing.
The court allows 120 days for the presentation of a reorganization plan and an additional 60 days for its debtors to vote on the approval of that plan, putting the original deadlines for Ahern’s initial “exclusivity period” to end in April and June 2012.
On March 23, 2012, Ahern requested from the court an additional 120 days for each deadline, which would give the company until Aug. 20 to present its plan and until Oct. 19 to secure acceptance of the plan. The company argued in its rulings that the bankruptcy was complex and that a new software system being installed during the summer would enable the company to make more accurate projections for its plan.
A group of noteholders who hold 33.67 percent of Ahern’s second lien notes argued against this request in a court filing where they said that there had been a year-long restructuring initiative leading up to Ahern’s Chapter 11 filing and that the rental company’s “assertion that this is a ‘complex’ restructuring is unfounded.” However, the group said that it was not arguing against Ahern’s request for extensions, only that it was suggesting that the court allow a shorter extension than Ahern was requesting.
That extension was granted by the court, as well as a subsequent two-month extension that made Oct. 9 the new deadline for Ahern’s presentation of plan.
In September there was a three-day mediation session between Ahern’s lawyers and lawyers for the creditors, which was overseen by a bankruptcy judge. The session produced no resolution.
That was followed by a series of continuances and another extension of the deadline until the company was ordered to present a plan by Nov. 30 followed by the judge’s Dec. 7 decision to end the exclusivity period.