BREAKING: Mega Carrier Celadon Group to File Bankruptcy, Cease Operations
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Indianapolis, IN – One of the largest publicly-traded transportation companies in the United States, Celadon Group, is expected to file bankruptcy as soon as Sunday, December 8.
Sources with direct knowledge of the situation told Transportation Nation Network (TNN) on Friday evening that the troubled Indianapolis, IN-based mega carrier will cease operations beginning Monday, December 9.
Celadon began notifying customers on Thursday, December 5 the company would soon be filing bankruptcy and no longer be servicing accounts.
TNN has confirmed this with multiple large Celadon customers as these customers are currently scrambling to secure needed capacity.
A source with direct knowledge told TNN top Celadon executives are scheduled to meet Sunday afternoon to finalize the bankruptcy filing, which is expected to be official that evening “as close to midnight as possible.”
Though sources indicate the company may file for protection under Chapter 11, it’s expected the company will ultimately liquidate its assets.
While some Celadon executives have been told of the company’s impending demise, most employees have not been notified as of yet, TNN can confirm.
The company’s more than 3,000 employees will likely be notified on Monday, multiple sources said.
According to data from the Federal Motor Carrier Safety Administration (FMCSA), the trucking giant operates more than 2,700 power units and employs more than 2,500 drivers.
However, a source tells TNN the latest driver count is approximately 1,800.
Fuel cards are currently operational, but it is unclear when the cards will be deactivated or how many drivers will be left stranded.
According to its driver recruitment website, which is still online as of Friday, Celadon operates terminals in the U.S. including it’s headquarters in Indianapolis, IN; Plum Tree, IN; Henderson, CO; Laredo, TX; Waxahachie, TX; Richmond, VA; Columbus, OH; Ottoville, OH; Rainbow City, AL; and Hope Mills, NC.
The company also owns divisions in Canada (Hyndman Transport) and Mexico (Servicios de Transportacion Jaguar).
In April of this year, Celadon announced it had reached a settlement with the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) relating to their highly-publicized investigations into the company’s filing of fraudulent financial statements dating back to fiscal year 2016.
Celadon agreed to pay restitution in the amount of $42,245,302.
Additionally, as part of the settlement, Celadon agreed to “continue the implementation of a compliance and ethics program designed to prevent and deter violations of anti-fraud, reporting, or books and records provisions of the federal securities laws, and to report at least annually to the DOJ with respect to the remediation and implementation of the company’s corporate compliance program and internal controls, and policies and procedures.”
Three former Celadon executives, William Eric Meek, 39; Bobby Lee Peavler, 40; and Danny Williams, 36; have been arrested and charged with multiple crimes in connection to what DOJ officials called a “complex securities and accounting fraud scheme that resulted in a loss of more than $60 million in shareholder value.”
Williams has already pled guilty to conspiracy to commit securities fraud, make false statements to a public company’s accountants, and falsify books, records, and accounts of a public company.
“Next Stage of Business Turnaround”
Also in April of this year, Celadon sold off two of its subsidiaries — A&S Kinard and Buckler Transport — for a reported $139.5 million.
Celadon also divested its logistics business division and assets associated with its intermodal business unit.
At the time, Celadon leadership indicated the money would be used to pay down existing equipment debt and capital leases, pay transaction expenses, reduce borrowings under the company’s revolving credit, and to provide additional liquidity.
In July, Celadon announced the company had secured $165 million in long-term financing.
At that time, Paul Svindland, Celadon’s chief executive officer (CEO), remarked the company was on a “solid platform for the next stage of our business turnaround.”
Svindland stated a top priority was “replacing approximately 2,000 four and five-year old tractors with new units.”
He called it the “linchpin to our next round of improvement.”
As part of the terms of the lending agreement, Celadon was required to meet performance benchmarks in order to continue to secure the financing.
One former high ranking Celadon executive told TNN on Friday the benchmarks were not realistic and the deal was “doomed to fail.”
Celadon began taking delivery of new tractors in August 2019, but soon began attempting to negotiate more favorable terms.
As an example, a source said the company took delivery of 150 late model Freightliners, but those trucks sat idle until approximately a month later when they were repossessed.
Transport Enterprise Leasing (TEL), which provided company trucks, as well as trucks for Celadon’s lease purchase program, also repossessed approximately 250 tractors, the source told TNN.
Another former Celadon executive told TNN the company was losing approximately $3 million per week in recent months.
As cash-on-hand vanished, Celadon executives worked to continue to secure financing.
However, TNN can confirm those negotiations, with creditors Luminus Energy Partners and Blue Torch Finance, failed this week.
Insiders Blame Meek and Aggressive Freight Pricing
One Celadon insider attributed the company’s ultimate failure to management’s strategic decision to undercut its competitors’ freight rates with the hope to make up for the reduced margins with increased volume.
As the freight boom of 2018 slowed in the early days of 2019, volume precipitously declined causing untenable financial stress on the company.
Another insider told TNN the company’s failure can be directly traced to Meek saying it was “poetic justice” the looming bankruptcy is coming on the heels of Meek’s arrest and indictment.
“He’s the reason. No ifs ands or buts about it,” the insider said.
Celadon was founded in 1985 by Steve Russell and first hauled car parts from the United States to Mexico.
Under Russell’s leadership, Celadon grew to one of the top 10 largest trucking companies in the country.
Considered by many as a fixture of Indianapolis, Russell passed away on April 15, 2016 after a long illness.
Prior to his passing, Russell groomed longtime Celadon executive, Paul Will, to lead the company.
Will served as CEO beginning in 2012 and became Chairman in 2015.
Will, who is a certified public accountant, resigned from Celadon in July 2017, and the company brought in Svindland to take over.
Before joining Celadon, Svindland served as Chairman and CEO of Farren International Holdings, Inc., a private equity backed holding company for trucking companies.
Largest Truckload Carrier Bankruptcy in History
Celadon’s bankruptcy will be the largest truckload carrier failure in history.
The carrier was honored with many awards during its more than 30-year history though.
In 2014, Celadon was recognized by Forbes as #66 on their list of America’s Best Small Companies.
The company was also a fixture on the Transport Topics Top 100 For-Hire Carrier List.
In 2018, Celadon came in at #38 on the list.
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