United Road Towing, mostly owned by Medley Capital, has filed for Chapter 11 bankruptcy, according to court documents submitted on Monday.
The filing with the US Bankruptcy Court in Delaware shows the vehicular towing company plans to sell its assets and will hold an auction no later than 27 March. The company also received permission to tap a $32.25 million bankruptcy financing.
In an affidavit, Michael J. Mahar, the chief financial officer, blamed the company’s dire straits on limited funds for marketing and equipment, falling sale prices of scrap metal from unclaimed and impounded vehicles and legal fees from two recent lawsuits.
Medley owned about 66 percent of the towing company as of 30 September 2016, according to a US Securities and Exchange Commission document.
In addition to the equity held, the New York-based asset manager also provided a $17 million senior secured second lien loan to United Road towing in 2014. As of 6 February, approximately $19.37 million in obligations remain outstanding under the second lien agreement.
United Road and Medley were not immediately available to comment.
The second-lien loan represents only 3.6 percent of Medley’s net assets, while its equity commitments in the towing company represents less than one percent, the SEC document shows.
United Road owes about $14 million to first-lien lenders and $19 million to second-lien lenders, states the court filing.
The company pulled in $87.6 million in gross revenue and $5.6 million EBITDA in 2016 and $88.1 million in gross revenue and a $2.8 million EBITDA for 2015.
The firm was one of the largest towing companies in the US, dispatching approximately 500,000 tows, managing over 200,000 impounds and selling over 38,000 vehicles annually nationwide.
However, the company’s debts, estimated to be $50 million to $100 million, outweighed its assets, between $10 million to $50 million, at time of bankruptcy filing.