BIG UPDATE: Huge shipping company files Chapter 11 bankruptcy to liquidate
The logistics sector has been grappling with financial turmoil since the COVID-19 pandemic hit in 2020, leading to significant upheaval within the industry. In that year alone, approximately 3,000 trucking companies closed their doors, and thousands of jobs were lost. As the pandemic waned, a driver shortage emerged, driving up demand for drivers, yet shipping rates fell in 2022 even as fuel costs surged.
Ongoing Challenges for the Logistics Sector
In the subsequent years, the logistics industry has been plagued by a series of challenges, including inflation, high interest rates, and escalating costs for insurance and wages. Major trucking companies like J.B. Hunt Transport Services (JBHT) and Knight-Swift Transport Services (KNX) recently reported disappointing earnings, citing weaker demand as inflation curtailed consumer spending on new goods.
The cumulative impact of these challenges has led several trucking and shipping companies to file for Chapter 11 bankruptcy this year, while some have opted for Chapter 7 liquidation. In a notable case, a company is pursuing both avenues simultaneously.
DRF Logistics Files for Chapter 11
On August 8, DRF Logistics, a global e-commerce shipping company, filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas. The company is seeking to wind down operations and liquidate its business while also working towards a sale of substantially all its assets. According to Chief Restructuring Officer Eric Kaup of Hilco Global, the move aims to provide distributions to stakeholders.
In its bankruptcy petition, DRF Logistics reported assets and liabilities between $100 million and $500 million. Its largest unsecured creditors include Priority Express Courier, owed $2.3 million; Spot Freight, owed $2.1 million; and XPO Express, owed $1.7 million.
Background and Financial Losses
DRF Logistics specializes in domestic e-commerce parcel services, offering delivery, returns, and cross-border solutions to 200 destinations. Previously an indirect subsidiary of Pitney Bowes Inc. (PBI), the company had been struggling with substantial losses each year due to overcapacity, which forced it to reduce pricing to maintain volume.
Pitney Bowes, which acquired DRF’s predecessor Newgistics in 2017, has funded the company’s annual losses—averaging around $97 million since 2019. However, a strategic review in early 2023 led to the decision to consider an out-of-court wind-down or potential Chapter 11 filing after unsuccessful attempts to sell DRF as a going concern.
To facilitate the bankruptcy process, Pitney Bowes relinquished majority voting rights, transferring 81% voting interest to a Hilco Global affiliate while retaining 19% voting rights and 100% economic interests in DRF Logistics. The debtor also arranged amendments to its secured debt, allowing it to file for bankruptcy and release about $1 billion in secured obligations.
Following the Chapter 11 filing, DRF Logistics filed a restructuring support agreement, outlining a plan for an orderly wind-down of its business. The challenges faced by DRF Logistics reflect broader struggles in the logistics industry as companies navigate a turbulent economic landscape.
