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GSO Capital, Goldman to buy bankrupt EZ Lube

The California-based oil change service provider is selling its assets to its lenders, Goldman Sachs and Blackstone debt unit GSO Capital Partners, amid steep losses. The company blames the recession, high gas prices and negative publicity for its bankruptcy filing.

EZ Lube, the largest quick lube operator in California, has filed for bankruptcy and plans to sell all its assets to its lenders Goldman Sachs and The Blackstone Group’s debt unit GSO Capital Partners.

The company, which runs 82 retail locations where it provides quick oil change service, filed for Chapter 11 protection after succumbing to its $114 million debt that it could not fund because of declining sales revenues.

The company blames the state of the financial markets, as well as “high gas prices during much of 2008”. The company also blames negative media coverage resulting from various court actions against the company for alleged labor violations and “misleading actions to sell service and parts to customers”.

“Decreased consumer confidence and worsening financial conditions have caused many customers to drive more miles between services, foregoing oil changes and other services,” Stephen Coffey, chief restructuring officer for EZ Lube, said in a bankruptcy filing. “The high gas prices experienced over much of 2008 resulted in customers driving fewer miles on average, and thus, oil changes and other services have been needed less frequently, leading to lower sales so far this year.”

EZ Lube is seeking bankruptcy court approval to name EZ Lube Acquisition, an affiliate of Goldman and

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GSO, as the high bidder in a bankruptcy auction scheduled for March for the assets.

The company, which was founded in 1988, lost $44 million in 2007, and the losses have continued this year, the filing said. 

GSO Capital, which Blackstone purchased in 2007 for $930 million to expand its credit capabilities, holds a second lien claim on EZ Lube for $27.8 million. The company owes Goldman a total of more than $52 million. The company also holds debt through subordinated notes, and has obligations for annual interest payments of $12 million, Coffey said.