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Yucaipa car hauler Allied Systems files Chapter 11
June 11, 2012 / 10:30 PM / in 5 years

Yucaipa car hauler Allied Systems files Chapter 11

* Allied had faced involuntary Chapter 11 by lenders

* Yucaipa has 63 percent Allied stake -- filing

* Falling revenue, litigation led to restructuring

By Jonathan Stempel

June 11 (Reuters) - Allied Systems Holdings Inc, which hauls cars and trucks to dealers from manufacturers and is majority-owned by private equity firm Yucaipa Cos, put itself into bankruptcy protection, less than one month after facing an involuntary Chapter 11 petition from creditors.

The Atlanta-based company and 18 subsidiaries, including its Canadian units, sought protection late Sunday night in the U.S. bankruptcy court in Delaware, citing its worsening financial condition as well as litigation by unpaid lenders.

It is Allied’s second Chapter 11 case in seven years, and one of many stemming from troubles in the U.S. auto industry.

Allied is restructuring in the wake of its 2009 decision to stop making some loan payments, after General Motors Corp and Chrysler LLC that year also entered bankruptcy and reduced vehicle production.

Yucaipa is run by the billionaire Ronald Burkle. It owns a 63 percent Allied stake as a result of the earlier bankruptcy, from which Allied emerged in May 2007, court papers show.

Allied said its revenue totaled $343 million in 2011, down 37 percent from a year earlier, and down 58 percent from 2007, which was prior to the global financial crisis.

It said revenue fell as vehicle sales slowed, and after it lost U.S. contracts with GM, Chrysler, Toyota and Honda when it raised rates in March 2011.

On May 17, three lenders filed involuntary Chapter 11 petitions against Allied, four months after having sued Yucaipa in a New York state court.

The lenders Black Diamond CLO 2005-1 Ltd, BDCM Opportunity Fund II LP and Spectrum Investment Partners LP blamed Yucaipa for intentionally causing Allied to default, in order to prevent them from being repaid and exercising other rights.

Allied said it recently had $274 million of principal outstanding under various credit agreements.

“In light of the involuntary bankruptcy cases and its financial condition, Allied determined that it would be in the best interests of (its) estates to proceed under Chapter 11,” Allied Chief Financial Officer Scott Macaulay said in a Monday court filing.

Allied is seeking $20 million of financing to keep operating under Chapter 11. It said it has about 1,835 employees. The filing does not include the company’s Haul Insurance unit or its Mexican and Bermudan units. Allied said it also intends to seek recognition in Canada of the Chapter 11 cases.

Burkle recently divested much of his stake in Barnes & Noble Inc after a failed proxy fight to win board seats.

The bankruptcy case is In re: Allied Systems Holdings Inc et al, U.S. Bankruptcy Court, District of Delaware, No. 12-11564. The New York case is BDCM Opportunity Fund II LP et al v. Yucaipa American Alliance Fund I LP et al, New York State Supreme Court, New York County, No. 650150/2012.

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