The liquidation of trucking giant Pride Group could affect freight rates and the driver market across the industry, according to an industry observer.
Pride Group, one of Canada’s largest trucking and leasing companies, filed for bankruptcy protection March 28, owing lenders $637 million.
Stakeholders recently dismissed a $56 million bid by members of the Johal family, which founded and operated Pride Group, to buy back the company. On Thursday, a court-ordered monitor filed documents indicating Pride Group’s operations and assets will be broken up to pay creditors.
“Given the feedback it has received to date, the monitor no longer views a … restructuring plan as a feasible option given the lack of stakeholder support for it,” bankruptcy monitor Ernst & Young wrote in its most recent report. “The Pride entities … [intend] to continue to move forward with a going concern sale or wind-down of the Pride Group Logistics entities.”
A trucking official in Canada said Pride Group’s demise could reverberate across the freight industry.
“The Pride Group of Companies being sold off and ordered to wind down operations will certainly have a ripple effect in the industry. The group controlled over 20,000 trucks in Canada and the U.S.,” Mike Millian, president of the Private Motor Truck Council of Canada (PMTC), told FreightWaves in an email.
PMTC is an association that focuses on the interests of private fleet operators across Canada.
“The wind down of operations should place some upward pressure on freight rates, however the level of that increase is hard to quantify, as we are still in a depressed, if not slightly improving cycle,” Millian said. “Pride Group was known to be very aggressive on bidding down rates however, so this in itself may help to see some rates/lanes recover back to a proper rate structure.”
Related: Pride Group’s bankruptcy filing underscores impact of trucking downturn
Pride Group was founded by Sulakhan “Sam” Johal, president and CEO, and his brother Jasvir Johal, vice president, in 2010. The Mississauga, Ontario-based company operates 50 locations across Canada and the U.S., controlling a fleet of 20,000 tractor-trailers. It offers domestic and cross-border transportation services in Canada and the U.S. and operates truck dealerships and service centers in both countries.
In March, Pride Group lender Mitsubishi HC Capital America filed a lawsuit seeking $100 million, accusing Sam and Jasvir Johal of defaulting on payments they had personally guaranteed, according to TruckNews.
Pride Group subsequently filed for creditor protection, partially blaming the pandemic for causing a capacity glut and low freight rates that left them unable to repay loans.
“Increased spot freight prices, and low diesel prices and interest rates during the pandemic led to an increase in trucking and logistics supply,” the company said in its bankruptcy filing in the Ontario Superior Court of Justice.
After Mitsubishi HC Capital America filed its lawsuit, more than 20 lenders filed claims against Pride Group totaling more than $637 million in debt. The debtors include financial institutions such as Mitsubishi Capital ($88.3 million), Daimler Truck Financial Canada ($193 million), Daimler U.S. ($69.7 million), Paccar Financial ($46.9 million) and Volvo Financial Services Canada ($9.8 million).
Pride Group still currently operates 1,068 trucks, and about 80% of its loads include perishable products, according to court documents. The company also has over 900 employees and contractors still on payroll, including drivers and office staff.
Pride Group was financing its ongoing operations largely from funds issued under a $30 million debtor-in-possession financing, which ran out at the end of July. The company is seeking a new interim financing facility to keep operations flowing through at least Sept. 8.
The financing includes payments to subcontractors, such as truck drivers under contract, mechanics and office contractors.
“We feel for the drivers who will lose their jobs and hope they will land on their feet in some of the many well run trucking companies that are out there,” Millian said. “In today’s hard financial times, we hope everyone is able to find full employment as soon as possible.”
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