Judge Sean Lane of the U.S. Bankruptcy Court in Manhattan said Monday that it's clear Atlantic Express is unable to secure financing on better terms than those being provided by Wells Fargo Bank and that without this financing, the company would have to cease operations.
Previously, Judge Lane granted the company access to $10 million of this loan provided by Wells Fargo Bank on an interim basis. The approval Monday guarantees Atlantic Express's ability to tap the full amount of the loan, which matures Jan. 15.
That date was a modification--the loan originally was to come due Dec. 31--and was one of several technical changes made to resolve several objections to the funding. Ultimately, there were no remaining objections to the loan on Monday.
This approval is the final check on the to-do list before Atlantic Express attempts to sell its assets. It's planning to hold an auction next week. If it's unable to accomplish the sale the company will be forced to liquidate, it said.
Atlantic Express hasn't yet named a lead bidder. The company may return to bankruptcy court on Dec. 9 to ask Judge Lane's approval should it decide to name one and wants to offer that party protections like a breakup fee.
Judge Lane will review the results of the auction on Dec. 16.
Atlantic Express is also in the process of negotiating changes to the contract with its union--the Local 1181-1061 branch of the Amalgamated Transit Union. Atlantic Express's attorney, Lisa G. Beckerman of Akin Gump Strauss Hauer & Feld LLP, said that a union vote on proposed changes to the contract is being taken this week.
Atlantic Express entered Chapter 11 bankruptcy last month, strapped with a liquidity crisis caused by high labor costs and the loss of some revenue as a result of a change to bidding contracts in New York City this year. Overall, company revenue has fallen 10% in the last year, it said.
Atlantic Express, which operates in five states and is the largest school-bus contractor for both New York City and Philadelphia, said its business in New York has become so unprofitable that other areas of the business can't compensate for it.
The company has $173.4 million in assets and $251.2 million in debt, which includes $43.49 million in senior debt owed to Wells Fargo and $155 million in second-lien notes outstanding, according to court documents.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com
Write to Stephanie Gleason at stephanie.gleason@wsj.com
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(END) Dow Jones Newswires 12-02-131424ET Copyright (c) 2013 Dow Jones & Company, Inc.
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