Huge shipping company files Chapter 11 bankruptcy to liquidate

According to The Street, The logistics industry has faced severe financial strain since the COVID-19 pandemic disrupted global operations in 2020. The sector saw approximately 3,000 trucking company closures and thousands of job layoffs. A subsequent driver shortage led to increased demand for drivers, but shipping rates fell in 2022 while fuel prices doubled. Over the past two years, inflation, high interest rates, and rising insurance and wage costs further exacerbated the industry’s woes.

Financial Distress Hits Major Trucking Firms

Leading trucking companies, including J.B. Hunt Transport Services (JBHT) and Knight-Swift Transport Services (KNX), have recently reported disappointing earnings due to weakened demand for their services. Inflation has dampened consumer spending on new goods, compounding the difficulties faced by these companies.

Also read: Big retail brand makes a post-bankruptcy comeback

Trucking and Shipping Companies File for Bankruptcy

Several trucking and shipping companies have been forced to file for Chapter 11 bankruptcy this year, with some opting for Chapter 7 to liquidate their assets. Notably, some companies are pursuing both Chapter 11 and liquidation processes simultaneously.

DRF Logistics Files for Chapter 11 Bankruptcy

On August 8, DRF Logistics, a global e-commerce shipping company, filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas, Houston. The company seeks to wind down and liquidate its business while exploring the sale of its assets to provide distributions to stakeholders. According to Chief Restructuring Officer Eric Kaup of Hilco Global, DRF Logistics listed assets and liabilities ranging from $100 million to $500 million in its petition. Major unsecured creditors include Priority Express Courier, owed $2.3 million; Spot Freight, owed $2.1 million; and XPO Express, owed $1.7 million.

Challenges and Strategic Moves

DRF Logistics, based in Austin, Texas, provided domestic e-commerce parcel services, including delivery, returns, and cross-border solutions to 200 destinations. The company, which became an indirect subsidiary of Pitney Bowes Inc. (PBI) following its acquisition of Newgistics in 2017, has struggled with significant losses due to overcapacity and reduced pricing pressures. Despite Pitney Bowes’ efforts to support the company’s losses—averaging about $97 million annually since 2019—the firm initiated a strategic review in early 2023. After an unsuccessful attempt to sell DRF as a going concern, Pitney Bowes considered an out-of-court wind-down or Chapter 11 filing.

Also read: Popular Italian restaurant chain files for Chapter 11 bankruptcy

To facilitate the Chapter 11 filing, Pitney Bowes transferred majority voting rights of DRF Logistics to a Hilco Global affiliate while retaining 19% voting rights and 100% economic interests. The debtor arranged secured debt amendments to release approximately $1 billion in secured debt, enabling the bankruptcy filing. The day after the filing, DRF Logistics introduced a restructuring support agreement for an orderly wind-down and liquidation of the business.