NationsRent Faces Possible Chapter 11

Dec. 1, 2001
FORT LAUDERDALE, Fla. In a document recently filed with the Securities and Exchange Commission, Fort Lauderdale-based NationsRent warned that it is considering

FORT LAUDERDALE, Fla. — In a document recently filed with the Securities and Exchange Commission, Fort Lauderdale-based NationsRent warned that it is considering filing for bankruptcy reorganization.

The company reported it is in default on a $790 million credit facility, the result of more than $80 million in accumulated losses. If NationsRent can't resolve the default, its “ability to continue as a going concern would be impaired,” the company said.

NationsRent expects to miss a Dec. 1 payment on a $57.3 million loan under the credit facility, which is with a group of about 70 lenders. The lenders have several rights and remedies available to them, including declaring all amounts outstanding, together with accrued interest, to be immediately due and payable. NationsRent said it is working with its lenders and negotiating a restructuring of its existing debt.

NationsRent recently reported a $19.8 million loss in the quarter ended Sept. 30, compared with a $1.3 million profit for the same period last year. Total revenue for the latest quarter was $157.9 million, a 14 percent drop from $184.6 million a year ago.

Excluding the restructuring and other charges of $10.9 million after-tax or 19 cents per diluted share recorded in the first quarter of 2001, the company recorded a net loss of $41.4 million or 72 cents per diluted share for the nine months ended Sept. 30, 2001, compared to net income of $9.5 million or 13 cents per diluted share for the nine months ended Sept. 30, 2000.

Gross profit was $47.6 million for the third quarter, down from $70.2 million for 3Q00.

“The continuing economic slowdown and recent dramatic events during this quarter affected us, as well as our customers,” said CEO James Kirk. “The company has many strengths to build on for the future including its growing customer base, well-organized brand, quality fleet and convenient locations in key markets. We have also made progress restructuring our operations and reducing costs and capital spending.”

The company said it is making progress on its operational restructuring initiatives by disposing of underutilized rental equipment, repositioning its rental fleet into markets where it can obtain higher utilization and reducing rental fleet capital expenditures.

Kirk blamed a rapidly weakening economy and highly competitive market conditions for its failure to meet revenue and debt-reduction goals. “With continuing uncertainty about the economy, we do not expect to see an improvement in the near term,” Kirk said.

Standard & Poor's cut its ratings on NationsRent to CreditWatch with negative implications. The “CC” ratings is the lowest rating for a company not in bankruptcy proceedings. If the company fails to make its loan payment or files for bankruptcy, the ratings will be lowered to “D.” “It's a pretty dire situation,” said Brian Janiak, a Standard & Poor's analyst.

Through acquisitions and construction, NationsRent grew to operate about 230 stores. But problems developed last year after the company expanded its equipment fleet in anticipation of significantly higher growth.

Still, NationsRent's still carries about $1.1 billion in debt. The company said it is exploring “a number of options” to lessen the burden, including seeking Chapter 11 protection in U.S. Bankruptcy Court. NationsRent also said it is in negotiations with potential investment sources to obtain additional financing.

NationsRent's stock has fallen more than 90 percent in the past year. The New York Stock Exchange informed NationsRent early last month that the stock no longer met listing requirements.

The company bypassed its quarterly conference call with investors — a ritual for most companies — in early November. Mark Baker, a NationsRent spokesman, cited lack of shareholder interest and cost for not holding the call.

NationsRent's investors include Miami Dolphins owner H. Wayne Huizenga, who sits on NationsRent's board and owns about 1.7 million shares, according to an SEC document filed earlier this year. H. Family Investments, a firm controlled by Huizenga's son, Wayne Huizenga Jr., owns 12 million shares, or about 21 percent of the shares.

If NationsRent files for Chapter 11, it would mark the second Fort Lauderdale-based company of which the elder Huizenga is a director to file Chapter 11. ANC Rental Corp., parent of Alamo Rent A Car and National Car Rental, filed for reorganization on Nov. 13.

NationsRent is No. 4 on the RER 100.

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