Ahern Rentals president and CEO Don Ahern, whose company has been in Chapter 11 since December 2011, is no fan of bankruptcy.
In an interview with industry publication Access Lift & Handlers, Ahern described bankruptcy as “an incestuous and evil process,” according to a Jan.8 article by Lindsey Anderson.
Ahern is apparently upset about the decision by Reno-based Bankruptcy Court Judge Bruce Beesley to terminate the company’s exclusive right to file a reorganization plan early last month, clearing the way for a group of noteholders with roughly 40% of the company’s second-lien debt to file their own plan.
Further, according to an article last month in the Las Vegas Review-Journal, one other unidentified firm – not an Ahern creditor – may also submit a bid for the company (see “Ahern exclusivity terminated, report says,” LCD News, Dec. 10, 2012).
As reported, in terminating exclusivity Beesley raised questions about the plan proposed by the company that would have left 97% of the company in Ahern’s hands, while requiring the company’s creditors to take a haircut on their claims. Beesley ruled that the company had already had enough time to negotiate a plan, and he did not think the company was making good-faith progress toward a consensual plan.
Exclusivity remains in place for now, however, because Beesley stayed enforcement of his decision pending an appeal filed by Ahern.
According to his comments to Access Lift & Handlers, Ahern suggested his company’s better-than-expected financial performance since entering Chapter 11 should have earned it more deference from the bankruptcy court judge.
“The judge should have given us time to negotiate,” the article quotes Ahern as saying. “The big story here is that our company is rapidly recovering and I think they’re trying to get it from us, because if we continue to recover, it will be harder and harder for them to win this.”
“We are generating cash like crazy,” Ahern said.
According to Ahern, his company’s proposed plan gave creditors the choice of either receiving payment in full on the form of new debt on a “set interest rate,” or immediate payment on a discounted cash basis.
But as reported, a draft plan filed on Nov. 30 said about $111.5 million in senior secured term loan claims would be paid in full, but then specified that the claims would be paid their pro rata share of $90 million. And about $249.2 million in second-lien loan deficiency claims would also be repaid in full, the company said, but in an explanation of how that repayment will take place, the company specified that the notes would be repaid over the course of seven years, accruing interest starting in the fifth year, and then at a rate of only 2%.
According to the noteholder group, “The plan proposes two equally unacceptable options, both of which are completely inconsistent with debtor’s representations to the court about its enterprise value and anticipated plan. The debtor offers the first and second lien creditors the option of either accepting significant discounted cash payouts or accepting new debt obligations with significantly extended maturities and extraordinarily reduced interest rates, and, in some instances, deferred interest.”
Meanwhile, Don Ahern had a warning for any potential acquirer of his company in light of the opening provided by Beesley. “If they force me out,” he told Access Lift & Handlers, “I will be back in it before the sun comes up. If somebody else owns Ahern Rentals, I will be Ahern Rentals biggest competitor.”
As is often the case with family businesses, there appears to be more at play in this case than mere dollars and cents.
The company was founded by Ahern’s father, John Ahern, in 1953, according to the company’s website. In bio on the site, Don Ahern says, “I, Don F. Ahern, was born into the family business in 1953, the same year Dad started the company. I am the youngest of four children and seemed to be destined to steer the company into the future.” – Alan Zimmerman