Essex Crane Rental Corp. will be liquidating assets at a public auction sale at the office of its legal counsel in Chicago on Friday Aug. 12, the company announced. Essex has been operating under forbearance agreements in relation to a credit agreement from May 2014, and is behind in its payment obligation by at least $150 million, not including interest, fees and other charges. The sale was initially scheduled for July 28, but was postponed.
On June 23, Essex entered into a sixth forbearance agreement with the revolving lenders under its credit agreement including Wells Fargo Capital Finance. Under its terms, Essex agreed to cooperate with the lenders with respect to the lenders’ plan to conduct a transfer of some or all of its collateral.
“Over the past year, Essex Crane has been operating under forbearance agreements and working with its lenders to identify the way to best maximize value for all of its shareholders,” said Essex president and CEO Nick Matthews. “Throughout this process, we have explored several options including the sale of Essex Crane as a going concern, selling equipment assets in auctions and by other means and restructuring around a smaller level of debt. At this point, Essex Crane’s lenders have chosen to offer Essex Crane’s assets in a public auction in an effort to increase the value received in exchange for those assets. It is unclear if the public auction will provide more value than the other strategies already pursued or what other alternatives the lenders may choose to pursue if the auction does not result in the sale of all or a portion of Essex Crane’s assets.”
Essex subsidiary Coast Crane Co. received a notice of default in April and a reservation of rights letter from Wells Fargo Capital Finance, the lead lender and agent under the Coast Crane Second Amended and Restated Credit Agreement as a result of noncompliance with certain delivery and reporting requirements within its credit facility. Despite the default, Coast Crane has continued to operate in excess of its performance-related covenants. The company expects it will be able to continue to use the Coast Crane Revolving credit facility to fund operations.
Meanwhile, the company has been working with legal advisors over the past several months to reevaluate strategic alternatives, specifically related to the sale or refinancing of Coast Crane. The results of the sale process were encouraging and indicated value, net of debt, in excess of current market capitalization. However, values were not a level that garnered support of the company’s board. After reviewing market feedback, the board has elected not to continue to pursue a sale of Coast Crane at this time. The company has focused on refinancing the Coast Crane revolving credit facility, and continues to do so while maintaining a dialog with its advisors regarding potential future opportunities for Coast Crane.
Throughout the first half of 2016, the transportation end market continued to display year over year increases in activity driven by bridge work in the Midwest and Southeast regions, Essex reported in a business update. General building remains strong, resulting in increased tower crane utilization and average rental rates year over year. However, the retail and rental equipment sales market remains soft and the challenges in the energy sector have continued. Petrochemical activity in the Pacific Northwest decreased year over year and impacted heavy rough terrain cranes. While overall rough terrain crane utilization has been consistent year over year, the mix has shifted toward the lighter lifting capacities. The Gulf Coast has shown a decline in industrial/marine and petrochemical activity, which has impacted hydraulic crawler crane utilization as compared to the strong first half of 2015.
While Essex Crane’s results have been significantly negatively impacted by the ongoing forbearance issues, Coast Crane continues to generate significant free cash flow.
The company said it expects to begin providing regular financial updates to the market beginning with the reporting of second quarter results in August 2016. Essex Crane Rental has not provided financial results since delisting from the stock market in December of 2015.
