Dueling plans to pull Ahern Rentals Inc. out of Chapter 11 bankruptcy will now go to creditors for a vote as majority owner Don Ahern showed a new willingness to cut a deal with his arch nemesis, the Las Vegas Review-Journal reports.
On March 8, U.S. Bankruptcy Court Judge Bruce Beesley approved the disclosure statements submitted by both the company and its junior lenders. Although similar in numerous respects, the lenders’ plan accepts ownership of the longtime pillar of the Las Vegas business community as repayment; the company’s version would pay them a combination of cash and new notes while letting Ahern retain his 97 percent stake.
Mutual suspicion between Ahern and the junior lenders, led by the Los Angeles investment firm Platinum Equity, has marked the case from the beginning.
The court schedule calls for voting in May, followed by what could be a multiday court battle in early June to decide the winner.
John Murtha, a Reno attorney who officially entered the case last week to represent Ahern and a couple of entities he owns, conceded that his client and the company had committed “tactical missteps” in the case.
The company, one of the largest construction equipment lessors in the country, is handled by a separate law firm.
“The (company’s) first plan was overly aggressive, no doubt at all,” said Murtha. “The (company) has listened and so has Mr. Ahern” to the complaints registered not only by creditors but also Beesley.
The first edition of the plan proposed paying $111.5 million in senior loans and $267.7 million in junior loans at less than current value, while keeping Ahern’s ownership intact. This ran contrary to basic bankruptcy law that owners lose part of all of their positions if creditors don’t get repaid in full.
Since then, Ahern sweetened the terms in several respects, notably by repaying the senior loans completely in cash.
“Had Mr. Ahern’s plan looked like this a few months ago, he probably would not be in this situation,” said Beesley, referring to the competing plan from the junior lenders.
Now, Murtha says a settlement is possible prior to a protracted and expensive court fight.
Daniel Connolly, representing the junior lenders, said, “I would not hold out an enormous amount of hope” for settling.
In the past, Ahern has publicly expressed concern that Platinum would take control of the company and institute major layoffs.
The plan for reorganization from second-lien noteholders of Ahern Rentals - which hold or manage almost $211 million, or 90 percent of Ahern’s 9.25-percent senior secured notes due 2013 - would reduce Ahern’s outstanding debt by at least $267.7 million by converting all second-lien notes into new equity interests. An additional $15 million in new equity would be added through a backstopped rights offering. Under the plan, all claims except for those from second-lien notes would either be unimpaired or fully paid in cash, the noteholders said, according to www.debtwire.com.
The second-lien investor group includes Del Mar Master Fund Ltd.; Feingold O’Keefe Capital; Nomura Corporate Research & Asset Management; Och-Ziff Capital Management; Sphere Capital and Wazee Street Capital Management.
Second-lien claimants would recover an estimated 75 to 80 cents on the dollar through a distribution of new equity and subscription rights to acquire additional new equity through a backstopped rights offering.
The company’s two shareholders, Don Ahern, who owns 97 percent and John Paul Ahern who owns 3 percent, would receive new warrants in satisfaction of their existing equity interests, according to the plan. Don Ahern would continue as president and CEO while Sphere Capital would have the right to appoint four of seven directors of the new board.
The plan estimates Ahern will have a reorganized value of between $515.4 million and $628.2 million, with a midpoint value of $572.3 million.
The disclosure statement says that proponents of the plan have no intent to combine the reorganized company with Maxim Crane or Nesco, which are partially owned by Platinum Equity, which also owns a portion of Ahern Rental debt.
Meanwhile, in other Ahern-related news, Lift & Access reports that Ahern Rentals has purchased 1,000 pieces of new construction equipment and plans to sell 750 machines at a live auction on Saturday, March 16.