================================================================= PERFORMANCE BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2006 (ISSN XXXX-XXXX) February 1, 2006 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001 ----------------------------------------------------------------- PERFORMANCE BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania 19030, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. New issues are prepared by Tara Eliza E. Tecarro, Christopher G. Patalinghug, Frauline S. Abangan and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of PERFORMANCE BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO PERFORMANCE BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF PERFORMANCE TRANSPORTATION [00002] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING [00003] LEASEWAY MOTORCAR'S CHAPTER 11 DATABASE [00004] LIST OF DEBTORS' 40 LARGEST UNSECURED CREDITORS [00005] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES [00006] SEC. 341 MEETING OF CREDITORS SCHEDULED FOR MARCH 6, 2006 [00007] DEBTORS' 1ST MOTION TO EXTEND SCHEDULES FILING DEADLINE [00008] DEBTORS' MOTION FOR AUTHORITY TO USE CASH COLLATERAL [00009] DEBTORS' MOTION TO OBTAIN $60 MILLION OF DIP FINANCING [00010] PTS RECEIVES COURT APPROVAL OF FIRST DAY MOTIONS KEY DATE CALENDAR ----------------- 01/25/06 Voluntary Petition Date 02/24/06 Deadline to Provide Utilities With Adequate Assurance 03/03/06 Deadline to File Schedules of Assets & Liabilities 03/03/06 Deadline to File Statements of Financial Affairs 03/03/06 Deadline to File Lists of Leases and Contracts 03/06/06 First Meeting of Creditors under 11 USC Sec. 341 04/25/06 Deadline to remove actions under FRBP 9027 05/25/06 Deadline to make decisions about lease depositions 05/25/06 Expiration of Exclusive Plan Proposal Period 07/24/06 Expiration of Exclusive Solicitation Period 01/25/08 Deadline to Commence Avoidance Actions Organizational Meeting to Form Creditors' Committees Bar Date for filing Proofs of Claim ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO PERFORMANCE BANKRUPTCY NEWS NEWS ----------------------------------------------------------------- PERFORMANCE BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. 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Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) PERFORMANCE BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' chapter 11 proceedings. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of PERFORMANCE BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF PERFORMANCE TRANSPORTATION ----------------------------------------------------------------- Performance Transportation Services, Inc. 35005 Michigan Avenue Wayne, MI 48184 Tel: (734) 858-1800 Fax: (734) 858-1932 http://www.pts-inc.biz/ Performance Transportation Services, Inc., and its affiliates are the second largest transporter of new automobiles, sport utility vehicles and light trucks in North America. The Company has more than 1,700 highly specialized vehicle transport carriers. It delivers approximately 3.3 million new cars and light trucks annually. The Company delivers, on average, approximately 13,000 vehicles each day. PTS provides services to all of the major domestic original equipment manufacturers and to some foreign OEMs. Substantially all of the management operations are performed by PTS. Vehicle hauling delivery services in the United States are conducted through three PTS subsidiaries: 1. E. and L. Transport Company L.L.C. 2. Hadley Auto Transport 3. Leaseway Motorcar Transport Company E&L serves the mid-western region, Hadley serves the western region and Leaseway serves the eastern and mid-western regions. As of January 25, 2006, the Debtors own or lease over 1,700 tractor-trailer units called Rigs, which are used to transport vehicles. PLG Leasing Corp. was formed to purchase or lease new Rigs and assign the Rigs to the Hauling Operations Entities for use. Prior to the formation of PLG Leasing Corp. each of the Hauling Operations Entities, Florida Leasco Company L.L.C. and HFS Investments, Inc., purchased and leased the Rigs. Since the creation of PLG Leasing Corp., any new purchase or lease of a Rig is made solely by PLG Leasing Corp. The Company also provides Short-Haul Vehicle Receiving Services. Transportation Releasing L.L.C. transports vehicles from some distribution points relatively near to three terminals located in Lorain, Ohio, Canton, Michigan and Dearborn, Michigan. Transportation Releasing only transports the newly arrived vehicles over distances averaging a few miles. The Company has developed a Load Builder Software program that identifies the availability of Rigs, determines the placement of vehicles in the Rigs, and tracks the movement of the Rigs. The Load Builder Software permits the Company to more efficiently conduct hauling services. Derivatives of the Load Builder Software have applications outside of the vehicle hauling business. In particular, the Load Builder Software can be amended so that it becomes a valuable program through which to track the movement of various types of inventory. Logistics Computer Services, Inc., exclusively provides services to third parties by creating derivative applications of the Load Builder Software, which allows third parties to more effectively track the movement of their inventory. Corporate Structure Performance Logistics Group, Inc., is the ultimate holding company that controls: -- Leaseway Motorcar Transport Company, -- Performance Logistics Group, Inc., -- Performance Transportation Services, Inc., -- Automotive Logistics Corp., -- E. and L. Transport Company L.L.C., -- Florida Leasco Company L.L.C., -- HFS Investments, Inc., -- Hadley Auto Transport, -- Hadley Computer Services, -- LAC Holding Corp., -- Logistics Computer Services, Inc., -- PLG Leasing Corp., -- Transportation Releasing L.L.C., and -- Vehicle Logistics Associates, L.L.C. PLG is the direct parent company of and holds 100% of the stock of PTS, Automotive Logistics Corp. and PLG Leasing Corp. PTS is the parent of and holds 100% of the stock or in the case of a limited liability company, 100% of the units of: -- E&L, -- Transportation Releasing, -- Hadley, and -- LAC Holding Corp. LAC Holding Corp. in turn is the parent of and holds 100% of the stock of Leaseway and 100% of the stock of the two non-domestic entities, Leaseway Motorcar Transport Canada, Ltd., and Leaseway Motorcar Transport of Puerto Rico, Inc. Automotive Logistics Corp. is the parent of and holds 100% of the stock of Logistics Computer Services, Inc., and 100% of the units of Vehicle Logistics Associates, L.L.C. In turn, Logistics Computer Services, Inc., holds 100% of the stock of Hadley Computer Services. PLG Leasing Corp. is the parent of and holds 100% of the stock of HFS Investments, Inc., and 100% of the units of Florida Leasco Company L.L.C. Employees According to John Stalker, vice president and chief financial officer of Leaseway, as of January 25, 2006, the Company employs 2,100 people. Approximately 220 of the employees are salaried employees and around 1,900 are hourly, union employees. All of the Company's drivers, most of its mechanics, and certain clerical employees are represented by the International Brotherhood of Teamsters. A small number of the Company's mechanics are represented by the International Association of Machinists and Aerospace Workers. Four of the employees are part-time, non-union employees. Corporate History PTS was formed in 1999 by an investor group led by affiliates of Onex Corporation, Hidden Creek Industries, and certain members of Hadley management. The Company has grown through additional acquisitions. By May 2000, PTS had acquired the operations and leasing companies of both E&L and Hadley, increasing its operational scale. In March 2004, PTS completed the acquisition of Leaseway, the third largest carrier of new automobiles in North America. The Leaseway acquisition significantly diversified the Company's customer base and reduced the Company's dependence on any one major customer. Mr. Stalker relates that the acquisition also expanded the Company's geographic reach. Equity There are six classes of common stock of PLG (A, B, C, D1, D2 and E) and no preferred stock. Although class D2 stock has been authorized, no shares of class D2 stock have been issued by PLG and, thus, there are only five classes of outstanding common stock of PLG. As of October 5, 2005, there were 328,733.108 total outstanding PLG shares: Class Outstanding Shares ----- ------------------ A 186,358.1030 B 74,700.4240 C 18,675.1060 D1 39,199.5800 E 9,799.8950 ------------ T o t a l 328,733.1080 ============ The largest shareholders of each class of stock and their percentage record ownership of all outstanding PLG stock are: Penske Truck 131,166.9 Leasing, L.P. (Class A) 39.9% Onex American 61,188.85 Holdings, LLC (Class B) 18.6% J2R Partners V 18,675.106 (Class C) 5.7% J2R Partners V 9,799.895 (Class E) 3.0% Norwest Equity 38,365.402 Partners VII, LP (Class D1) 11.7% Road to Bankruptcy Mr. Stalker relates that for the past few years, the Company has suffered net losses per fiscal quarter ranging from approximately $1,300,000 to $7,200,000. Decreasing revenues and increasing expenses have caused the Company's net losses and resulting need for bankruptcy protection, Mr. Stalker says. Significant cost increases coupled with declining revenues have placed tremendous financial stress on the Company, exposing them to a potential loss of market share, Mr. Stalker continues. Specifically, the Company has been adversely affected by: a. significant reductions in OEM production in North America over the past few years; b. an escalating cost structure under the current master agreement with the International Brotherhood of Teamsters covering all of the Company's drivers and substantially all of their mechanics; c. a substantial debt burden and consequent debt-service expense; d. significant downward pricing pressure on all automotive related suppliers; e. increases in diesel fuel costs; f. substantial recurring capital expenditures and maintenance costs; g. significant increase in collateral required to secure workers' compensation claims; and h. the inability to maintain compliance with financial covenants under certain credit agreements. ----------------------------------------------------------------- [00002] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING ----------------------------------------------------------------- DETROIT, Michigan -- January 25, 2006 -- Performance Transportation Services, Inc., ("PTS") the second largest transporter of new automobiles, sport-utility vehicles and light trucks in North America, announced that it and certain of its subsidiaries have filed voluntary petitions under chapter 11 of the U.S. Bankruptcy Code in order to re-align its capital structure, resolve its operational issues in order to allow it to continue to grow and thrive in today's auto industry. In conjunction with the filing, PTS has received a commitment from a group of lenders led by Credit Suisse, Cayman Islands Branch for up to $10 million in debtor-in-possession (DIP) financing. Upon Bankruptcy Court approval, the DIP financing will help provide funding for PTS's ongoing operations. PTS expects to utilize the chapter 11 process to reduce its debt and streamline its operations. PTS emphasized that the restructuring process is not expected to impact its ability to fulfill its obligations to its customers. PTS's non-U.S. subsidiaries were not a part of the filing and will continue their business operations outside of the chapter 11 cases. PTS, which operates under three key transportation business lines including: E. and L. Transport, Hadley Auto Transport and Leaseway Motorcar Transport employs over 2,000 employees who deliver approximately 3.8 million new cars and light trucks annually. The Company expects to deliver cars and trucks without interruption during the reorganization process. "PTS is integrated into the automotive industry and therefore we are subject to the cyclical trends of our large car manufacturing customers. We have worked diligently to keep pace with the changes in our industry, but decided that chapter 11 offered the Company the best chance of effecting the kind of changes needed to succeed in today's industry environment," said Jeffrey L. Cornish, PTS President and Chief Executive Officer. "This action enables us to continue operating our business without interruption while implementing a debt restructuring in a Court-supervised and controlled environment." PTS's decision to seek chapter 11 protection was precipitated by significant cost increases coupled with declining revenues that have placed tremendous financial stress on PTS. The current auto industry environment has shown a significant decrease in car manufacturing production in North America over the past few years, in addition to significant downward pricing pressure on all automotive-related suppliers. Declining revenue has been exacerbated by an increase in diesel fuel costs, an escalating cost structure under the current Master Agreement with the Teamsters and the increase in collateral required to secure workers' compensation claims. "We do not anticipate that our customers and suppliers will experience a change in the way we do business with them," Cornish said. "We have taken steps to make sure that vendors get paid in the ordinary course of business for goods and services provided after the bankruptcy filing, and that our customers continue to receive all deliveries on time with the same high quality service to which they are accustomed. Our new DIP financing, combined with the cash from operations, is expected to provide sufficient funding for operations during the chapter 11 process." Ongoing employee compensation and benefit programs are being presented to the Court for approval as part of the Company's "first day" motions. The Company anticipates that the Court will approve these requests, thereby ensuring that employees will continue to receive their compensation and benefits in the ordinary course of business. Cornish concluded, "I would like to thank our customers, vendors and business partners for their continued support during this process. We also appreciate the ongoing loyalty and support of our employees. Their dedication and hard work are critical to our success and to the future of the Company. Our management team is committed to making this financial restructuring successful and leading PTS toward a bright future." The Company's Chapter 11 petitions were filed in the United States Bankruptcy Court for the Western District of New York, Buffalo. Details regarding the filing can be found at http://www.pts-inc.biz and at http://www.bmcgroup.com/pts ----------------------------------------------------------------- [00003] LEASEWAY MOTORCAR'S CHAPTER 11 DATABASE ----------------------------------------------------------------- Lead Debtor: Leaseway Motorcar Transport Company 4749 Witmer Road P.O. Box 389 LBO Niagara Falls, New York 14305 Bankruptcy Case No.: 06-00107 Debtor-affiliates filing separate Chapter 11 petitions: Entity Case No. ------ -------- Performance Logistics Group, Inc. 06-00108 Performance Transportation Services, Inc. 06-00109 Vehicle Logistics Associates, L.L.C. 06-00110 PLG Leasing Corp. 06-00111 LAC Holding Corp. 06-00112 E. and L. Transport Company L.L.C. 06-00113 Automotive Logistics Corp. 06-00114 Florida Leasco Company L.L.C. 06-00115 HFS Investments, Inc. 06-00116 Logistics Computer Services, Inc. 06-00117 Transportation Releasing L.L.C. 06-00118 Hadley Auto Transport 06-00119 Hadley Computer Services 06-00120 Chapter 11 Petition Date: January 25, 2006 Judge: Michael J. Kaplan Court: Western District of New York (Buffalo) Debtors' Counsel: James A. Stempel, Esq. James W. Kapp III, Esq. Sven T. Nylen, Esq. KIRKLAND & ELLIS LLP 200 East Randolph Drive Chicago, IL 60601 Tel: (312) 861-2000 Fax: (312) 861-2200 - and - Garry M. Graber, Esq. HODGSON, RUSS LLP 1800 One M&T Plaza, Suite 2000 Buffalo, New York 14203 Tel: (716) 856-4000 Debtors' Financial Advisors: Jeffery J. Stegenga FTI CONSULTING, INC. 2001 Ross Avenue, Suite 400 Dallas, TX 75201 - and - Brian Creek FTI CONSULTING, INC. 333 W. Wacker, Suite 600 Chicago, IL 60606 - and - David J. Beckman FTI CONSULTING, INC. Belleview Tower 7887 East Belleview Avenue, Suite 650 Englewood, CO 80111 Debtors' Communications Consultant: Brenda Adrian Meaghan A. Repko SITRICK AND COMPANY 655 Third Avenue, 22nd Floor New York, NY 10017 Tel: (212) 573-6100 Fax: (212) 573-6165 Debtors' Notice and Claims Agent: BMC GROUP, INC. Estimated Assets: $10 Million to $50 Million Estimated Debts: More than $100 Million ----------------------------------------------------------------- [00004] LIST OF DEBTORS' 40 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature of Claim Claim Amount ------ --------------- ------------ Allied Systems Trade Payable $269,877 160 Claremont Avenue Suite 200 Decatur, GA 30030 Attn: Thomas M. Duffy Executive Vice President, Secretary and General Counsel Tel: (404) 370-4225 Fax: (404) 370-4206 Consolidated Waste Industries Trade Payable $205,288 10680 Silicon Avenue Montclair, CA 91763 Attn: Larry Hagenbuch President Tel: (909) 625-6645 Fax: (909) 482-2272 Pilot Wire $189,770 5508 Lonas Road Knoxville, TN 37909 Attn: Timothy J. Berry Tel: (865) 588-7488 ext. 37909 Fax: (865) 297-1423 Securitas Trade Payable $163,193 401 N. Michigan Avenue Suite 300 Chicago, IL 60611 Fleetcharge Trade Payable $125,377 c/o Navistar International 4201 Winfield Road Warrenville, IL 60555 Bridgestone/Firestone Trade Payable $121,948 BFNT, LLC 535 Marriott Drive Nashville, TN 37214 Deloitte Tax LLP Professional Services $89,650 Penske Truck Trade Payable $83,798 C.F. Bender Company Inc. Trade Payable $78,819 Sun Microsystems Inc. Technology $76,260 NOCO Wire $75,516 General Motors of Canada Ltd. Trade Payable $74,463 Ford Motor Company Trade Payable $70,090 Fleet Fuel Wire $69,155 McLearen's J.J.J. Trade Payable $66,734 Broadspire Wire $63,311 Cassens Transport Co. Trade Payable $61,094 Teamsters Pension Fund Pension $50,489 Active Transportation Trade Payable $48,786 Shank C&E Investments LLC Trade Payable $48,523 T-Check Wire $47,943 Superior Distributors Trade Payable $47,382 Tapco Industries Trade Payable $45,285 Charter Township of Lansing Tax $45,269 Teamsters Health & Welfare Benefits $44,372 Bandag Inc. Trade Payable $43,273 New York State Thruway #5270 Tolls $40,655 Vascor Ltd. Trade Payable $40,567 Maximus Professional Services $40,288 Autocomm Inc. Trade Payable $38,276 Southern Counties Trade Payable $37,411 EMC2 Software License $37,076 Carday Associates Inc. Professional Services $36,303 Southwest Brake Trade Payable $35,454 SGS Automotive Services Trade Payable $35,131 United Road Falcon Trade Payable $32,316 Auto Transport Toyota Motor Sales USA Inc. Trade Payable $31,658 Ohio Turnpike Commission Tolls $30,866 Buffalo Truck Center Trade Payable $29,879 Fleetpride Trade Payable $28,406 ----------------------------------------------------------------- [00005] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES ----------------------------------------------------------------- Performance Transportation Services, Inc., and its 13 debtor- affiliates ask the Court to jointly administer their Chapter 11 cases. Rule 1015(b) of the Federal Rules of Bankruptcy Procedure provides that if two or more petitions are pending in the same court by or against a debtor and an affiliate, the court may order a joint administration of the estates. "Many of the motions, hearings and orders that will arise in the [Debtors'] Chapter 11 Cases will jointly affect each and every Debtor," Garry M. Graber, Esq., at Hodgson Russ LLP, in Buffalo, New York, says. Mr. Graber asserts that joint administration will enable the Debtors to reduce fees and costs resulting from the administration of their Chapter 11 Cases and ease the onerous administrative burden of having to file multiple and duplicative documents. The Debtors believe that the rights of their creditors will not be adversely affected by the joint administration of their Chapter 11 Cases because they only request administrative, not substantive, consolidation of their estates. In addition, Mr. Graber contends that as a result of the joint administration: -- all of the Debtors' creditors will benefit from the reduced costs; -- the Court will be relieved of the burden of entering duplicative orders and maintaining duplicative files; and -- supervision of the administrative aspects of the Chapter 11 Cases by the United States Trustee will be simplified. Accordingly, Judge Kaplan grants the Debtors' request and directs that all pleadings and papers filed in their Chapter 11 cases be captioned: UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF NEW YORK ------------------------------------- : In re: Leaseway Motorcar Transport : Company, et al., : Case No. 1-06-00107 : Chapter 11 Debtors. : : ------------------------------------- Judge Kaplan makes it clear that a creditor filing a proof of claim against any of the Debtors will file the claim in the particular Debtor's bankruptcy case and not in the jointly administered case. ----------------------------------------------------------------- [00006] SEC. 341 MEETING OF CREDITORS SCHEDULED FOR MARCH 6, 2006 ----------------------------------------------------------------- Deirdre A. Martini, the United States Trustee for Region 2, will convene a meeting of creditors of Performance Transportation Services, Inc., and its debtor-affiliates on March 6, 2006, at 10:00 a.m. The meting will take place at the Office of the United States Trustee at 42 Delaware Avenue, Suite 100 in Buffalo, New York. This Meeting of Creditors is required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtors under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. ----------------------------------------------------------------- [00007] DEBTORS' 1ST MOTION TO EXTEND SCHEDULES FILING DEADLINE ----------------------------------------------------------------- Pursuant to Section 521(1) of the Bankruptcy Code, a debtor must file with the applicable court a schedule of all assets and liabilities, schedules of current income and expenditures and a statement of financial affairs. Rule 1007(c) of the Federal Rules of Bankruptcy Procedure allows a debtor to file its Schedules and Statements within 15 days of the commencement date of a bankruptcy case. An extension of time may be granted for "cause." Due to the nature of the Debtors' businesses, limited staff available to perform the required internal review of the Debtors' business and affairs, and the press of numerous other matters incident to the commencement of their Chapter 11 Cases, the Debtors believe that the 15-day automatic extension under Bankruptcy Rule 1007(c) will not be sufficient. "Indeed, it would be onerous, if not impossible, to complete the Schedules and Statements within that deadline," Garry M. Graber, Esq., at Hodgson Russ LLP, in Buffalo, New York, says. The Debtors assert that the volume of material that must be compiled and reviewed by their limited staff provides ample "cause" justifying the extension of time for filing the Schedules and Statements. At the Debtors' request, Judge Kaplan extends the deadline to file their Schedules and Statements to March 3, 2006. Judge Kaplan makes it clear that the extension is without prejudice to the Debtors' right to seek a further extension of time to file the Schedules and Statements or to seek a waiver of the requirement for filing certain Schedules and Statements. ----------------------------------------------------------------- [00008] DEBTORS' MOTION FOR AUTHORITY TO USE CASH COLLATERAL ----------------------------------------------------------------- As of the Petition Date, the Debtors owe money under two credit agreements: Credit Agreement Outstanding Amount Owed ---------------- ----------------------- First Lien Credit Agreement, $121,600,000 dated January 31, 2005, with Credit Suisse, Cayman Islands Branch, as sole administrative and collateral agent Second Lien Credit Agreement, $35,000,000 dated January 31, 2005, with Credit Suisse, Cayman Islands Branch, as sole administrative and collateral agent (Wells Fargo Bank, National Association, succeeded Credit Suisse as agent) PTS' obligations under the Credit Agreements are secured by liens and security interests in: * the capital stock of PTS and all of its domestic related subsidiaries; * the present and future property and assets (subject to customary exceptions) of PLG, PTS and all of its domestic related subsidiaries; and * the proceeds and products of those property and assets. Pursuant to Section 363(c)(2) of the Bankruptcy Code, a debtor- in-possession may not use cash collateral without the consent of the secured party or court approval. Section 363(e) of the Bankruptcy Code provides that upon request of an entity that has an interest in property to be used by a debtor, the court will prohibit or condition that use to provide adequate protection of that interest. The Debtors tell the Court that they need immediate access to the Cash Collateral to, among other things, pay present operating expenses, including payroll and pay vendors on a going-forward basis to ensure a continued supply of materials essential to their continued operations. To protect the Prepetition Secured Lenders from diminution of the value of their interest in their collateral, the Debtors propose that the Agents will be granted replacement and additional security interests in and lien on the collateral subject and subordinate only to the security interests and liens granted to postpetition lenders. The Debtors also propose that the Prepetition Agents and Secured Lenders will be granted a superpriority claim as provided in Section 507(b) of the Bankruptcy Code, immediately junior to the claims of postpetition lenders. The Debtors further propose to pay interest, fees and certain expenses of the Prepetition Agents and Secured Lenders. Interim Approval At the Debtors' request, the Court authorized the use of the Cash Collateral on an interim basis. The Prepetition Agents and Secured Lenders are granted Adequate Protection Liens and Section 507(b) Claims. They are also entitled to payment of interest, fees and expenses. The Debtors' right to use Cash Collateral will terminate if a trustee under Chapter 7 or 11 of the Bankruptcy Code or an examiner with enlarged powers relating to business operations is appointed. The Final Cash Collateral Hearing is scheduled for February 15, 2006, at 1:00 p.m. ----------------------------------------------------------------- [00009] DEBTORS' MOTION TO OBTAIN $60 MILLION OF DIP FINANCING ----------------------------------------------------------------- See prior related entry at [00008] (Debtors' Motion For Authority to Use Cash Collateral). Without access to fresh financing, the Debtors face a substantial risk of severe disruption to their business operations and irreparable damage to their relationships with their vendors and service providers, according to John Stalker, vice president and chief financial officer of Leaseway Motorcar Transport Company. Because the Debtors do not believe that it is feasible to attempt to prime the Prepetition Secured Lenders on a non-consensual basis, the Debtors' postpetition financing alternatives are limited, Mr. Stalker says. Credit Suisse, Cayman Islands Branch, acting as administrative and collateral agent, for itself and a syndicate of financial institutions, submitted a proposal, which the Debtors believe is their only real option. The proposal addresses the Debtors' working capital and liquidity needs while being acceptable to the Debtors' Prepetition Secured Lenders. Mr. Stalker relates that Credit Suisse's and the DIP Lenders' proposal provides the Debtors with funding to operate and maintain their businesses and to pay necessary expenses during their Chapter 11 Cases. Accordingly, in their business judgment, the Debtors decided to accept Credit Suisse's and the DIP Lenders' proposal. The Debtors and Credit Suisse engaged in good faith and extensive arm's-length negotiations that culminated in an agreement to provide the Debtors up to $60,000,000 of secured postpetition financing. A full-text copy of the 145-page DIP Credit Agreement is available for free at: http://bankrupt.com/misc/PTSDIP_CreditAgreement.pdf By this motion, the Debtors ask the Court to approve the DIP Credit Agreement. The significant terms of the DIP Credit Agreement are: a. Borrower: Performance Transportation Services, Inc. b. Guarantors: Performance Logistics Group, Inc. and all domestic subsidiaries of the Borrower filing for bankruptcy. c. Administrative Agent and Banks: A syndicate of financial institutions, including Credit Suisse as administrative agent, to be arranged by Credit Suisse as sole lead arranger and bookrunner. d. Collateral Agent: Credit Suisse. e. Commitment: Up to $60.0 million comprised as: (i) a $10,000,000 revolving credit facility; (ii) a $32,300,000 term loan facility; and (iii) a $17,700,000 synthetic letter of credit facility. f. Purpose: The Commitment will be available: (i) to provide working capital for the Borrower and its subsidiaries, (ii) to refinance approximately $32.3 million in respect of the revolving and term loan constituting the First Lien Obligations, and (iii) to refinance approximately $17.7 million of the commitments credit-linked deposit account and letter of credit obligations under the tranche A letter of credit facility constituting the First Lien Obligations. (g) Term: The Commitment will terminate on the earlier of January 2007 or the substantial consummation of a confirmed plan of reorganization or a sale of substantially all of the Debtors' assets. (h) Carve-Out: The sum of U.S. Trustee and Bankruptcy Court Clerk fees; $750,000; unpaid professional fees and disbursements; and $1,000,000 in executive compensation. All of the Borrower's obligations to the DIP Lenders will constitute allowed superpriority claims. The DIP Lenders will be granted security interests and liens. The liens securing the DIP Financing will prime the liens granted to secure payment under existing agreements to the Prepetition Secured Lenders. The Debtors will also pay fees and interests to the DIP Agent and Lenders. The DIP Credit Agreement contains customary events of default, including failure to make payments on interest and fees when due; failure to pay principal when due; noncompliance with negative covenants; noncompliance with other covenants; representations and warranties proving materially incorrect when made; dismissal of the Chapter 11 Cases or conversion to chapter 7; and appointment of a chapter 7 or 11 trustee. The Debtors promise that cumulative Consolidated EBITDA, which is Consolidated Net Income plus the sum of: -- Consolidated Interest Expense, -- consolidated income, single business, franchise, unitary or gross receipt tax expense, -- all amounts attributable to depreciation and amortization, -- any non-cash charges or expenses, -- any extraordinary losses, -- the cumulative effect of any change in accounting principles, -- any professional fees related to the restructuring, and -- fees, charges and expenses related to any events or transactions that are unusual in nature and infrequent in occurrence; and minus any extraordinary gains and all non-cash items of income, all determined on a consolidated basis in accordance with GAAP, beginning on January 1, 2006, will not be less than: Period EBITDA ------ ------ January 2006 ($961,000) February 2006 ($629,000) March 2006 $1,312,000 April 2006 $2,850,000 May 2006 $3,979,000 June 2006 $5,207,000 July 2006 $2,945,000 August 2006 $3,350,000 September 2006 $3,963,000 October 2006 $6,216,000 November 2006 $7,596,000 December 2006 $8,933,000 Interim Approval On an interim basis, Judge Kaplan permits the Debtors to borrow up to $30,000,000 under the DIP Credit Agreement to: -- provide working capital for the Debtors, -- pay interest, fees and expenses, -- refinance $16,142,699 in respect of the revolving loan and term loan under the First Lien Credit Agreement, and -- refinance $8,857,301 of the commitments, credit-linked deposit account and letter of credit obligations under the Tranche A Letter of Credit Facility of the First Lien Credit Agreement. The Court grants the DIP Lenders security interests and liens. A full-text copy of the Interim DIP Order is available for free at http://bankrupt.com/misc/DIP_InterimOrder.pdf The Court will convene the Final DIP Hearing on February 15, 2006, at 1:00 p.m. ----------------------------------------------------------------- [00010] PTS RECEIVES COURT APPROVAL OF FIRST DAY MOTIONS ----------------------------------------------------------------- DETROIT, Michigan -- January 26, 2006 -- Performance Transportation Services, Inc., ("PTS") the second largest transporter of new automobiles, sport-utility vehicles and light trucks in North America announced it has received interim court approval on its $60 million debtor in possession (DIP) financing facility, which is ultimately expected to provide approximately $10 million of additional liquidity. The final DIP hearing is scheduled for February 15, 2006. The company also received interim approval to use its cash collateral through the duration of the Company's chapter 11 cases. The DIP financing and cash generated from daily operations will be used to continue to pay vendors, employees and other general corporate expenses. The Company also announced that it received Court approval during its first day hearings to, among other things, pay prepetition employee wages, salaries, workers' compensation, health benefits, life and disability insurance and other employee obligations during its restructuring under chapter 11. The Company obtained permission to pay certain trust taxes in the ordinary course of business, including prepetition amounts, and to continue using its existing cash management systems. The Company is authorized to pay ordinary course postpetition expenses without seeking further Court authority. PTS President and Chief Executive Officer Jeffrey L. Cornish said he was extremely pleased with the Court's approval of its "first-day" orders and DIP financing. "Having secured DIP financing and approval of our first-day motions within the first week of the case gives PTS forward momentum toward restructuring the Company. As we head into this challenge, our postpetition financing commitment gives the Company an additional $10 million of liquidity, and will afford us the resources to work with vendors to continue shipments and to provide uninterrupted service to our customers." Mr. Cornish also stated that PTS has already contacted a number of its major customers and vendors, who have indicated their intention to continue to support PTS in its chapter 11 reorganization. "There will be no interruption in operations at the Company's terminals, and we will continue to purchase and pay for goods and services from our suppliers," said Mr. Cornish. The Company filed voluntary chapter 11 petitions on behalf of the Company and certain of its subsidiaries in the U.S. Bankruptcy Court for the Western District of New York, Buffalo on January 25, 2006. The cases were filed to allow PTS to re-align its capital structure with market economics and to resolve its operational issues in order to allow it to compete more effectively in today's auto industry. PTS's non-U.S. subsidiaries were not included in the filing and will continue their business operations outside of the chapter 11 cases. *** End of Issue No. 1 ***