Ahern creditors can submit reorganization plans

Longtime local business Ahern Rental Inc. lost control of its attempt to escape Chapter 11 bankruptcy as a judge opened the door on Friday for outsiders to submit reorganization plans.

During a hearing in Reno, U.S. Bankruptcy Court Judge Bruce Beesley ended the legal protection known as exclusivity, during which only the bankrupt company can propose a plan. Ahern has enjoyed exclusivity since it filed its Chapter 11 last December, but Beesley said he saw no progress in resolving flashpoints between the company and its creditors.

Beesley asked how quickly an attorney for one set of creditors could file their own plan so that he could put that plan and Ahern's versions on a tandem track to approval. Although New York attorney Daniel Connolly did not talk about what the plan might include, creditors have consistently stressed the need for CEO Don Ahern to at least surrender a substantial portion of his 97 percent ownership as part of a repayment package.

At least one other firm with no stake in the case has talked about submitting a bid without making a commitment.

Ahern attorney Gregg Galardi indicated he would appeal Beesley's ruling, but Beesley refused to halt the rest of the case and wait for the outcome.

Calls seeking comment from Ahern executives were not returned Friday.

Every bankrupt company starts Chapter 11 with a 90-day exclusivity period, with a judge empowered to grant extensions. Beesley has done that four times since the initial protection expired in March.
In reading his ruling from the bench, Beesley ticked off factors that a judge must review in deciding whether to give a company more time. But what stood out for him was a promise Ahern made during the summer to install new software that could generate accurate financial projections for its plan, a system that still has numerous bugs, and inability to negotiate any deal with creditors. The settlement attempt included a three-day mediation session in September overseen by another bankruptcy judge.

"(Ahern) has probably had enough time to try to negotiate a plan and develop adequate information" through the new software, Beesley said. "I don't think good faith progress is being made on a plan."

At another point, he added, "Frankly, I can't figure out why (Ahern) takes this approach."

The plan lists $379.2 million in debt held by major lenders plus much smaller amounts held by others. Beesley said he does not think Ahern's plan offers full repayment - known as present value - so the owners cannot hang on to their entire positions under bankruptcy law.

Galardi argued unsuccessfully that the any determination that the plan fell short of legal standards was premature and likely wrong.

Don Ahern has portrayed some of the creditors as Wall Street opportunists who have bought up pieces of the debt at a discount and now want to take over a company started by his father in 1953.

"If someone else owns this company, there'll be huge job losses," he told the Review-Journal in August. "These guys are from New York and Beverly Hills (Calif.). They want to flip the company and sell it to a competitor. Almost half the staff would be gone."

But the creditors have consistently argued that under bankruptcy law they must get full repayment or the owners must surrender at least part of their stake.

Contact reporter Tim O'Reiley at toreiley@reveiwjournal.com or at 702-387-5290