U-Haul Teeters on Edge of Bankruptcy

June 19, 2003
By Adrian Michaels in New York

U-Haul's parent company is having serious difficulty securing the emergency finance it needs and the van rental group could file for bankruptcy as early as Friday.

Amerco, whose orange and white U-Haul vans are a familiar sight on roads throughout the US, has been in negotiations with creditors since announcing in March that it was near to agreeing a new credit facility of $866m.

The company said then that the financing deal would be in place during May. But it has issued no news since then and some analysts believe a bankruptcy filing is inevitable.

People close to the discussions said on Thursday that a last-minute deal was still possible but that some creditors and bondholders were running out of patience.

One analyst said that shareholders might see substantial benefit if the company went into bankruptcy. "If the company is declared bankrupt, it is worth significantly more than the current stock price," said Ian Gilson of Roth Capital Partners.

Mr Gilson believes that the company could restructure, sell some operations, see off its creditors and still be viable. Amerco has about $1bn in debt on its balance sheet and another $1bn in leasing obligations. Its financial difficulties started last October when it missed a $100m bond payment five days after reassuring investors that it had enough cash to meet its obligations.

It has since missed a further debt payment and three coupon payments on its preferred shares, according to credit rating agencies. Bob Jankowitz, analyst at Moody's, said: "The probability of bankruptcy gets higher with each day we go forward."

Last month Amerco, which has denied it is in danger of bankruptcy, parted company with Crossroads, the turnround specialist it hired last year. Crossroads refused comment. Amerco said it had completed its assigment. The group has since hired Alvarez & Marsal, another turnround specialist.

Any bankruptcy filing could yet be postponed. The summer months are when the company generates the most cash from Americans taking to the road.

Amerco is run and in large part owned by members of the Shoen family, descendants of the moving company's founder L.S. Shoen. The group's corporate governance record is cited by analysts and creditors as a major worry and the company has responded recently by hiring a new chief finance officer and creating an independent governance committee.

However it announced in May that the Securities and Exchange Commission, the US's chief financial regulator, was probing its financial statements. Restated financials are due to be filed by the end of the month.

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