US same-day package delivery company Velocity Express has declared itself insolvent and has beensold to a financial investor in a debt-for-equity deal. The firm will restructure and stay in
business.Velocity Express, which describes itself as “the nation’s largest provider of time definiteregional delivery solutions” filed for insolvency last Thursday (September 24). It had already beende-listed by NASDAQ in August.
The company announced at the same time, however, that private financial investor Comvestwould buy a majority holding through an exchange of debt for equity in the company.
Vincent A. Wasik, Velocity’s Chairman and Chief Executive Officer, stated: “We believe thatthis transaction is a major win for Velocity, our customers, independent contractors andemployees. It will reduce the burden of our legacy liabilities by eliminating over $100million of debt and create a financially stronger, well capitalized company. With astronger financial position, we will continue to be able to pursue large business developmentopportunities, and increase our investment in technology and services to benefit our valuedcustomers.
“We will also have the backing and support of a new strong financial and operating partner inComVest. Thanks to the continued support and hard-work of our more than 4,000 dedicated employeesand independent contractors, we expect this transition to be seamless to our Customers,” he added.
Jose Gordo, a Partner at ComVest, commented: “ComVest is truly excited about the futureprospects of Velocity. We believe that this restructuring will eliminate the significant debt thathas burdened the company for the last few years and turn the company’s balance sheet into a majorstrength. Velocity has a solid operational foundation with outstanding long-term customers anda strong sales pipeline. Together, we look forward to continuing to provide Velocity’scustomers with the timely, high-quality service they have come to expect.”
Velocity’s restructuring will be accomplished through a pre-packaged Section 363 salepursuant to Chapter 11 of the United States Bankruptcy Code. The change in ownershipwill be achieved through a restructuring of Velocity’s balance sheet in which ComVest will exchangeits Velocity debt for a controlling equity ownership interest. Upon the completion of thetransaction, ComVest will own the substantial majority of Velocity’s equity. The managementteam, which will remain in place, will own a minority stake in the restructured Company, as willformer bondholders.
The company said it expects the transition will be seamless for customers, independentcontractors, employees and vendors. All settlement payments for independent contractorsas well as payroll and benefits for employees have been guaranteed by Velocity to ensure a smoothprocess, which should be completed in 30 to 45 days.
