Parties vie for control of 60-year-old Ahern Rentals Inc.

The lines have now formed in the battle to see whether Ahern Rentals Inc., one of the venerable Las Vegas-based companies at 60 years old, will make it to 61 under the founding family’s control.

Explanations of two competing plans to pull the construction equipment lessor out of Chapter 11 bankruptcy will receive a March 8 hearing in U.S. Bankruptcy Court, prior to sending them out to creditors for the vote that will determine the winner. Although judges can reject one or both explanations, known as disclosure statements, frequently they approve both and let those with financial stakes in the outcome make their own choices.

On one side, Don Ahern proposes to keep his 97 percent stake in the company started by his father, John Ahern, as a gas station where Stratosphere now stands. In the process, he would pay off two sets of lenders owed $379.2 million either discounted lump sums or over time at lower interest rates than they now receive.

However, he has until next week to sweeten the terms to try to gather support.

Unhappy with this treatment, one group of junior lenders filed their own terms on Feb. 8, after two appellate courts refused to extend the company’s legal protection from outside bids. These lenders, led by a half dozen investment funds, propose taking all the ownership in return for zeroing out their $267.7 million debt. Everyone else would be paid in full.

If Don Ahern and his brother, John Paul Ahern Jr., who has the other 3 percent of the company, go along with the junior lenders plan, they would receive an unspecified number of warrants that could eventually be converted into a new piece of the ownership.

Should they vote no, they would receive nothing.

Another set of loans designed to carry the company through the bankruptcy, standing at $224.2 million in November, would convert to permanent financing, and the lenders would not vote on either plan.

Don Ahern was said to the out of the office and company chief financial officer Howard Brown did not return calls seeking comment. Lender representatives did not comment.

But both sides approach the election contest with mutual suspicion that predates the December 2011 filing of the Chapter 11.

“All they want to do is own us,” said Ahern of the second-tier lenders, in an Aug. 17 interview with the Review-Journal. “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.”

At this point, according to court papers, the company has rebounded after being hammered during the recession through a combination of expense cuts and opening new offices across the country to lessen long-standing reliance on the Southwest, particularly Las Vegas.

With EBITDA, a measure of cash flow, projected to hit $105.2 million in 2012 and continue rising for the next five years, Ahern estimates in court papers that the company is now worth more than the total $610.4 million debt.

But lenders see the makings of a scorched-earth policy, highlighted by an interview Don Ahern gave to the trade magazine International Rental News in December.

“If (lenders) force me out, I will be back in it before the sun comes up,” he said. If somebody else owns Ahern Rentals, I will be Ahern Rentals’ biggest competitor.”

“Mr. Ahern’s threat to the reorganized business is consistent with the treats that he has made to creditors over the past year,” according to court papers for the lenders.

Included in the gestures was a proposal to change the terms of some branch office leases so they could be pulled away from the company if lenders took over, although the company portrayed it as a way to improve the flexibility and cost structure.

If the duel follows a proposed schedule, the final vote and courtroom showdown would come in early June.

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