By Dietrich Knauth
NEW YORK (Reuters) - Coach USA, the operator of Megabus and other commuter bus lines in the U.S. and Canada, filed for bankruptcy protection in Delaware late Tuesday, seeking to sell its assets and shed debt incurred in an ill-timed 2019 private equity buyout.
Coach, the largest privately-owned bus company in the U.S., was acquired by private equity firm Variant Equity Advisors for $270 million, mostly using debt that is still on the company's books.
Coach quickly ran into trouble servicing its debt, as the COVID-19 pandemic caused bus ridership to decline by 90% from 2019 to 2020, according to documents filed in Wilmington, Delaware bankruptcy court.
While ridership levels have rebounded somewhat since the lows of 2020, they were still only 45% of pre-pandemic levels in 2023, and Coach has faced higher interest rates and increased costs for basic needs like employee retention and fuel, Coach said in its court filings.
Coach CEO Derrick Waters (NYSE:WAT) said that buses will continue to run as normal during the company's bankruptcy.
"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," Waters said in a statement.
Coach entered Chapter 11 with $197.8 million in debt, including $37 million due on a pandemic relief loan under the Coronavirus Aid Relief & Economic Security (CARES) Act, and at least $134 million in other unpaid obligations, including trade debts.
Coach USA operates in 27 locations in the U.S. and Canada, with 2,700 employees and 2,070 buses operating. The company operates several other bus brands in addition to Coach, including Megabus, Dillon's Bus Company, and Go Van Galder.
Coach entered bankruptcy with three sale agreements in place, each of which is subject to higher and better offers. Those sale agreements cover 16 of Coach's 25 business lines, and they would preserve jobs for about 2,100 Coach employees, according to court documents.
Renco Group, a private investment company, would acquire the majority of Coach's assets in exchange for taking on $130 million of company debt and certain union contracts. Avalon Transportation would buy bus lines in Atlanta, Georgia and Western states, as well as specialized tour bus divisions operated by Coach, for $14.8 million, and ABC Buses would buy a fleet of 143 double-decker buses for $2.3 million, according to court documents.