Coach USA, owner of the Megabus brand, has filed for bankruptcy.
The company says it hasn’t been able to recover from a decline in ridership brought on by the pandemic, and that after evaluating its options, it determined that initiating court-supervised sale processes is the best path forward.
Coach USA, owned by private-equity firm Variant Equity, operates under several brands, including Megabus, Coach Canada, Dilon’s Bus Company, Coach USA Airport Express, and Go Van Galder. Coach USA’s fleet of about 2,070 buses carry millions of passengers through North America annually.
“As we move through this process, our top priority remains safely carrying the millions of passengers who choose our buses each year and working closely with our valued contract customers and transportation agency partners,” said Derrick Waters, Chief Executive Officer of Coach USA, who took over the role in March 2023. “We appreciate the dedication of our employees to operating with safety as a priority and serving our customers and our communities.”
Two sales agreements
Coach, which billed itself as the largest privately owned bus company in the nation, enters Chapter 11 with agreements to sell major lines to Renco Group and Avalon Transportation.
Bus Company Holdings, an affiliate of The Renco Group, has agreed to buy Dillon’s, Elko, Megabus Retail, Montreal, Olympia, Trentway/Ontario (including Megabus Canada), Perfect Body, Rockland, Shortline (including Chenango Valley Bus Lines), Suburban, Van Galder, Wisconsin Coach, certain assets of Community Coach, and existing Megabus intellectual property and retail operations.
Avalon Transportation is acquiring Lenzner, Kerrville, All West, and ACL Atlanta.
The proposed transactions are subject to higher and better offers and court approval, among other conditions.
According to its Chapter 11 petition filed Tuesday in Wilmington, Delaware, the company currently holds $100 million to $500 million in assets while holding about $200 million debt.
Coach noted that last year’s 2023 ridership was less than half of pre-pandemic levels. The decline in ridership caused the company’s operating revenue to drop by 60% in 2020, though it has seen a slow rebound in recent years, rising to 58% of pre-pandemic levels in 2023. In addition to the drop in revenues, the company struggled with rising costs of fuel, insurance and labor.
The company’s ridership struggles reflect a broader industry impact. The pandemic, which forced bus companies to cease operations due to lockdowns and other regulatory requirements, resulted in half of the operators going out of business. During this period, bus travel fell by more than 80% as public health authorities urged people to avoid travel where possible. While many operators are now seeking an uptick in business with less competition, many carry higher levels of debts tied to taking out loans for refinancing required to stay afloat during this period.
Suppliers to be paid in full
Chapter 11 of the Bankruptcy Code is designed to allow companies to continue operating while they shed debt and reorganize. The deals with Renco Group and Avalon Transportation, which are treated as initial bidders at a court-supervised auction, must first be approved by the judge overseeing the bankruptcy.
The company is borrowing $20 million to help finance the restructuring case and continue operating during the bankruptcy.
“We are working closely with our vendors, business partners and transportation agencies as usual. (We are) paying vendors and suppliers in full under normal terms for goods and services provided on or after the filing date,” the company said. “We have financial resources to meet our obligations during the court-supervised sale processes, with a financing commitment which includes $20 million in new money that is subject to court approval.”
In March, the Wall Street Journal and the American Bankruptcy Institute Journal reported Coach USA was exploring financial restructuring options, including a possible bankruptcy, and had engaged advisers.
Alston & Bird LLP is the company’s legal counsel, Houlihan Lokey, Inc. is financial advisor, CR3 Partners LLC is restructuring advisor, and Spencer M. Ware is serving as Chief Restructuring Officer.
The transportation company offers bus services in 27 locations in the U.S. and Canada and carries more than 38 million passengers annually, according to its website. Its Megabus service has carried more than 50 million people through more than 280 cities since it was started in 2006.
“We are committed to preserving our legacy of reliable and affordable transportation services while securing the best possible outcome for our stakeholders,” said the company. “These steps are crucial in navigating the challenges brought on by the pandemic and ensuring the continued operation of our vital transportation network.”
The company said it remains optimistic that the divestitures would preserve thousands of jobs and guarantee uninterrupted transportation service for millions of customers.
