Creditors will vote in May, case could be decided in June
In the Ahern Rentals bankruptcy case, two competing debt reorganization plans have been approved by Judge Bruce Beesley after a March 8 hearing in the Reno, Nev., federal court. The plans were submitted by Ahern Rentals and the second tier lenders. The court schedule will have creditors vote on the plans in May with hearings to follow in June to decide the outcome of the debt reorganization.
The court approved the disclosure statements — legal explanations of how the business will be reorganized and creditors repaid.
On Feb. 25, lawyers for Ahern Rentals filed a plan that would pay first-tier creditors the $111.5 million they are owed in full. Second-tier debt-holders would be paid $160 million in cash and be issued notes to pay off the remaining $267.7 million of what they are owed. According to the rental company, its revised plan provides 100 percent recovery to creditor’s claims according to the definitions specified by the court.
Ahern had earlier presented a plan that would initially pay just $90 million of its debt and offered terms for the remaining debt that were less favorable to the creditors than their initial loans. The creditors successfully argued in court that this proposal violated the principal that creditors cannot suffer a loss without the debtor giving up equity in return.
The competing plan calls for the investment group made up of six investment funds to jointly take over ownership of the rental company in lieu of their $267.7 million share of the debt. The group then would repay all other debt holders. If Don Ahern, who currently owns 97 percent of the rental company, and his brother, John Paul Ahern Jr., who owns the remaining 3 percent, do not fight against the proposal, they would receive warrants that could eventually be converted into shares of the company. The disclosure statement filed with the court says that proponents of the plan have no intent to combine the reorganized company with Maxim Crane or Nesco, which are partially owned by Platinum Equity, which also owns a portion of Ahern Rental debt.
Under the creditors’ plan, Don Ahern would continue as president and CEO of the company, while Sphere Capital would appoint four of the seven directors to the new board for the company.
Ahern Rentals originally filed for Chapter 11 bankruptcy protection on Dec. 22, 2011, and was given a “period of exclusivity” — 120 days — to present a plan for debt reorganization without the specter of a competing plan from creditors. In April 2012 the company was given its first extension to its period of exclusivity. In August 2012, the rental company received an additional extension to its period of exclusivity through Oct. 9, 2012, and additional extensions through early December 2012, when Ahern presented its initial reorganization plan. The judge in the case called Ahern’s initial reorganization proposal inadequate because it would have creditors receiving less than complete repayment while company owners Don and John Ahern would give up none of their equity in the company. Judge Beesley ended Ahern Rentals’ exclusivity period on Dec. 7, 2012. Lawyers for the rental company lost an appeal to that ruling and creditors were allowed to present their own plans for reorganization.