Judge orders Ahern to show first draft of reorganization plan

Ahern Rentals Inc. will retain sole control of its Chapter 11 bankruptcy case for another month amid continuing friction with lenders, although a judge indicated on Wednesday that would be the end.

In addition, U.S. Bankruptcy Court Judge Bruce Beesley ordered Ahern to show the first draft of its reorganization plan to lenders in three weeks to try to push the case forward. The construction equipment leasing company, a fixture in the Las Vegas business community for six decades, filed the case in December but has made only halting headway in coming up with a financial blueprint to escape bankruptcy.

Chapter 11 law confers debtor companies the sole right to propose a plan during the first three months of a case, known as the exclusivity period, although a judge may grant extensions. Ahern's period ran out in March but received extra allowances until Wednesday.

The judge's action now sets the new deadline at Nov. 30, with the possibility of additional time to round up votes for a plan if it has officially put on the table.

Ahern attorney William Noall said the company had spent much of this year selecting and installing a new performance management software system that is key to predicting how the company will perform in the future.

A critical part of emerging from Chapter 11 is convincing a judge that Ahern has the financial resources to fulfill the promises in a plan and not revert to defaults.

The software work was finished on Oct. 15 and now the company is testing it to ensure it cranks out accurate numbers, Noall said.

Further, he added, the company has operated profitably, with the earnings before interest, taxes, depreciation and amortization, a standard benchmark, running at $101.4 million for the year through September, 11.7 percent ahead of budget.

"The company continues to grow and that growth adds value to the company and inures to creditors," Noall said.

However, three groups of lenders holding about $335 million in debt complained that Ahern's strategy has been to drag out the case as long as possible, hoping that improved results will allow it to force losses on the lenders and keep Don Ahern as the 97 percent owner.

"We do feel like we are hostages to (Ahern)," said Daniel Connolly, an attorney representing one groups of noteholders. "Part of the challenge is to wear out secured creditors with expensive and time-consuming litigation."

He conceded that Ahern's results had swung upward, but not nearly enough to allow the company to emerge by paying off everyone completely. "The company is overleveraged," he said. "No increase in productivity, no increase in economics is going to overcome that. (Ahern) is just trying to kick the can down the road as far as it can."

In bankruptcy, owners typically must surrender their stakes unless creditors are repaid entirely or agree to keep the owners in place.

According to court papers, Ahern entered bankruptcy with $637.5 million in loans secured by all of its assets, with some of it rolled into a loan that was made to keep operations going during the case.

A settlement conference mediated by another judge made little headway, he said, although about 50 attorneys showed up for what are normally very cozy procedures.

Michael Baxter, representing creditors owed about $4 million but holding no collateral, pushed for the extension of exclusivity because of what he considered significant progress.

"Termination would be devastating to unsecured creditors, devastating to employees and devastating to companies in Nevada and elsewhere that depend on (Ahern)," he said.

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