Unable to escape the clutches of the recent construction plunge, Ahern Rentals Inc. on Thursday filed for Chapter 11 bankruptcy protection.
Although the company had started to show improved operating results in recent months after instituting several cost-cutting measures and expanding its geographic footprint, it could not overcome a crushing debt burden. Its main business of buying construction equipment and then leasing it to contractors requires constant access to large doses of credit.
“(W)ith approximately $620 million in funded debt, (Ahern’s) business is overleveraged,” Chief Financial Officer Howard Brown said in papers filed with the bankruptcy case.
For more than a year, Ahern negotiated with its lenders for extensions, particularly on a revolving credit line that had a functional limit of $310 million that came due in August. Although most of the lenders gave preliminary approvals, several holdouts that ultimately forced the bankruptcy because loan changes required unanimous agreement.
The company will request court approval today for access to cash to continue regular operations, including making the payroll for 1,800 people, and to open a new lending line while it tries to restructure its balance sheet.
Ahern, started in 1953, is one of Las Vegas’ oldest businesses and grew with the rapid development of the valley.
The company, 97 percent owned by Don Ahern, peaked in 2008 with
$381.4 million in revenues and earnings of $150.1 million before taxes, depreciation, amortization and interest.
Then the recession hit, leaving it with thousands of pieces of equipment with loans against them but earning little. The CityCenter project alone had required more than 4,000 pieces. As a result, Ahern opened 24 new branches — raising its total to 74 — across the country to reduce its dependence on Las Vegas and enter less-depressed markets.
Revenues still dropped to $292.7 million and earnings to $53 million. For the year ended Nov. 30, revenues had started rebounding, with revenues up to $329.8 million and earnings up to
$76.5 million. But this was not enough to satisfy all of Ahern’s lenders.
Contact reporter Tim O’Reiley at
email@example.com or 702-387-5290.