BIG NEWS: Three more shipping companies file for Chapter 11 bankruptcy
The devastation caused by the COVID-19 pandemic led to widespread business closures, initially diminishing demand for goods and significantly disrupting supply chains. Factories and warehouses drastically reduced output or shut down completely.
A Struggling Workforce
In 2020, the trucking industry was hit hard, losing 88,000 jobs and seeing over 3,000 companies close, according to the Commercial Carrier Journal. Many truckers left the industry for other occupations and did not return to the road.
As the pandemic subsided, the trucking sector faced a record shortage of over 81,000 drivers by 2021, as reported by truckinfo.net. This driver shortage had profound implications, leading to increased costs, supply chain disruptions, and shipping delays. Companies found themselves paying higher wages to attract drivers while also grappling with increased turnover, recruitment, and training costs.
A Surge in New Drivers
By 2021, the rising freight rates began to attract new drivers to the industry. By July 2023, there was a remarkable 96% increase in registered for-hire drivers, totaling over 475,000, according to Time.
However, the relief was short-lived. In 2022, freight rates began to decline, and diesel fuel prices more than doubled. The industry faced additional challenges such as inflation, rising interest rates, and increasing insurance and wage costs. Major trucking companies like J.B. Hunt Transport Services (JBHT), Knight-Swift Transport Services (KNX), and XPO (XPO) exerted pressure on smaller companies, many of which struggled to generate adequate revenue.
Financial Distress and Bankruptcy Filings
The financial strain in the logistics sector has driven several trucking companies to file for Chapter 11 to reorganize or Chapter 7 to liquidate their assets.
For instance, Boateng Logistics filed for Chapter 7 bankruptcy on February 22, announcing plans to liquidate its business. Similarly, Arnold Transportation Services, a 92-year-old trucking company, laid off all employees and shut down operations just five days before filing for Chapter 7 liquidation on April 30.
U.S. Logistics Solutions, owned by private equity firm Ten Oaks Group, also filed for Chapter 7 bankruptcy on June 21 in Houston, Texas, as it ceased operations and laid off its workforce.
Recent Chapter 11 Filings in Florida
In July, three Florida trucking companies filed for Chapter 11 protection to reorganize their operations.
AB Brothers USA, based in Miami, along with its affiliate A1 Transport Network, filed for Chapter 11 on July 20 in the Southern District of Florida. The petition revealed over $593,000 in assets against $1.05 million in liabilities, with the largest creditor being Crossroads Equipment Lease & Finance, owed over $233,600.
Additionally, AOG Trucking from McAlpin, Florida, filed for Chapter 11 on July 17, reporting $1 million to $10 million in both assets and liabilities. Its largest creditor, BMO Harris Bank, is owed over $713,500.
While the exact reasons for these bankruptcy filings were not detailed in the petitions, they underscore the ongoing challenges faced by the trucking industry.
