March 17, 2010
Brundage-Bone and JLS Restructuring Update
Brundage-Bone and JLS continue to be the subject of blog postings on the Web, communications to other pumping companies, and most recently inflammatory letters addressed “To all Construction Companies.” Most of these communications are misleading and include partial truths that are typically spun into a libelous and defamatory misstatement of the facts. And as always, the author does not have the personal integrity or the courage to put his or her name to the writing. As we have done throughout this process, Brundage-Bone wants to take this opportunity to, once again, set the record straight and to provide accurate factual information about its restructuring.
DIP Financing Agreement
On March 1, the Court entered its Final Financing Order authorizing a $15 million DIP loan facility for the Company. The Order provides funding for a period of 180 days from the filing date and authorizes the Company to use its cash plus additional availability created under the DIP Loan for the “ongoing working capital needs…” of the Company. The Company is not limited to the payment of wages, insurance, and fuel only as has been stated in numerous communications and has, in fact, been paying these items during the normal course of business since February.
The DIP financing agreement, not unlike any credit arrangement with a lender, contains many covenants including the submission of weekly forecasts to Wells Fargo. The Company is in full compliance with its covenants and has generated more cash and credit availability than originally forecast. In fact, the Company has not yet had to use its DIP facility to fund its daily operations.
Wages, Payroll Taxes, Employee Benefits
The Company has paid and continues to keep current the payment of all wages, payroll taxes, and employee benefits. All Union benefits, both prepetition and postpetition, have been paid and will continue to be paid promptly.
The Company’s employee benefit programs have not been restructured as a result of the reorganization and there has been no loss of benefits to eligible employees. All policy premiums and employee deductions have been paid to the appropriate benefit provider.
Federal Tax Claims
In our FAQ’s posting dated February 24 under Restructuring News on our Web site, brundagebone.com, we provided a table listing the claims made by the Internal Revenue Service at that time, an explanation of the type of claim, and the status of each claim. Included in the FAQ’s was Claim 50-1 filed on February 8, 2010, in the aggregate amount of $261,414.70. On February 18, 2010, “Amendment No. 1 to Proof of Claim dated 02/08/2010” was filed by the Internal Revenue Service. The Amendment deleted a credit totaling $3,783.45 that was on the original Claim 50-1, but assessed interest and penalties totaling $13,704.84. The Amended Claim 50-1, now known as Claim 50-2, totals $271,336.09.
The Internal Revenue Service did not file a claim for an additional $271,336.09 of past due taxes as the letter “To all Construction Companies” implies. The IRS merely filed an amendment to a previous claim adding penalties and fees. The Company continues to have proof that it has paid all Federal taxes, including FICA, FUTA, and other payroll taxes on time. We have contacted the IRS about the claims and believe that an amendment cancelling the alleged past due claims will be forthcoming.
Insurance, Vendors, and Suppliers
1. All commercial insurance premiums, most significantly Workers Comp, Auto, and General Liability, have been paid and all policies remain in full force and effect. The Company will gladly provide a confirmation these facts to any customer requesting this information.
2. The Company has restored credit terms with many of its vendors and suppliers, most significantly with Putzmeister, Schwing, Construction Forms, Shell, Michelin, and almost all of its fuel suppliers.
3. All vendors and suppliers have been paid promptly since the date of filing. Most of the Company’s vendors that supported the Company before the filing continue to support the Company today.
4. The Company has reestablished fuel cards and credit card lines for its employees to use for business expenses.
5. Property rents were paid beginning February 1 and continue to be paid on time.
6. Real estate loan payments were paid beginning February 1 and continue to be paid on time.
Chief Turnaround Officer
Now that the company is financially stable, our efforts have shifted towards the final completion and filing of a Plan of Reorganization. Through a cooperative effort with its lenders, the Company’s Board of Directors has engaged a Chief Turnaround Officer (CTO) to work with and to report to the Board of Directors and the Management team. The CTO will not hold a seat on the Company’s Board of Directors and does not have the authority to hire or fire management or employees. The CTO was specifically hired to work “…in full cooperation and coordination with the CEO…and CFO of [the] Company…”
The Company and Wells Fargo entered a joint stipulation to the Court for the retention of a CTO and a subsequent motion was filed on March 8 to approve the stipulation. There have been no objections filed and, upon approval by the Court which all parties expect to occur, the motions for the Trustee and Examiner will be withdrawn.
Communication
Imagine if your business was assaulted every day on the Web and through other methods by individuals that hide behind assumed identities. The intent of these individuals is not to accurately communicate facts, but to create an atmosphere of misunderstanding with the intent to cause worry within the Company’s most valuable assets: its employees, customers, and vendors.
Reorganization is a slow process and on any given day motions may be filed by any number of interested parties. Most of these motions are routine and have little to do with the actual operations of the Company. However, some motions will undoubtedly have an impact on the Company. That’s when you will no doubt hear new rumors or have incomplete information presented to you that will be advertised with great alarm and a prediction that you will be adversely affected.
If you are concerned by Web postings or other rumors that you hear, we encourage and welcome the opportunity to talk to you directly and to set the record straight. Please do not hesitate to call any member of our executive management team.
Bruce Young, President 303-289-7497
John Hudek, CFO 303-289-7497
Randy Waterman, COO 602-558-6558
Jeff Switzer, COO 805-432-1220
__________________________________________________
February 24, 2010
Frequently Asked Question ("FAQs") About our Bankruptcy & Our Reorganization
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BBCP
Proof of Claim for Internal Revenue Taxes
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Status
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||||
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Kind of Tax
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Tax Period
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Date Tax Assessed
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Amount of Tax Due
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|
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1
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CORP-INC
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10/31/2009
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Not Filed
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$100.00
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BBCP's corporate income tax return was due 2/15/2010. BBCP has filed for an extension.
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2
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WT-FICA
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12/31/2009
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Unassessed -
No Return
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$71,207.71
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PAID. Fourth quarter FICA due 12/31/2009 was paid in full on 12/31/09 via ACH debit in the amount of $65,666.92. The 941 return was filed on 1/27/2010, prior to the 1/31/2010 deadline.
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3
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FUTA
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12/31/2009
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Unassessed -
No Return
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$21,021.01
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PAID. BBCP made this payment via ACH debit on 2/1/2010.
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4
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WT-FICA
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03/31/2010
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Unassessed Liability
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$165,576.95
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PAID. This amount relates to FICA that will be owed for the period ending 3/31/2010. The first quarter 2010 is not over and, therefore, BBCP cannot file this return yet. BBCP remits FICA tax every week and has made all required payments.
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5
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CORP-INC
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10/31/2010
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Not Filed
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$100.00
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This amount relates to the corporate tax return for the period ending 10/31/2010. The 2010 fiscal year has not ended yet.
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6
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FUTA
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12/31/2010
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Unassessed Liability
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$3,109.03
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PAID. This amount relates to FUTA due 12/31/2010. The year 2010 has not ended and, therefore, BBCP cannot file the 12/31/2010 return. BBCP remits FUTA tax every quarter and has made all required payments.
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7
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EXCISE
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03/31/2004
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Not Filed
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$100.00
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These amounts are qualified by a footnote to the IRS' Proof of Claim, indicating that the IRS is only looking for the returns for these periods.
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8
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EXCISE
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06/30/2004
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Not Filed
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$100.00
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|
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9
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EXCISE
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09/30/2004
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Not Filed
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$100.00
|
|
|
JLS
Proof of Claim for Internal Revenue Taxes
|
Status
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||||
|
|
Kind of Tax
|
Tax Period
|
Date Tax Assessed
|
Amount of Tax Due
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|
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1
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CORP-INC
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12/31/2006
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Not Filed
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$100.00
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BBCP is an S-corporation, owns 100% of JLS, and has made a valid qualified subsidiary election for JLS. JLS is not required to file a separate federal income tax return. BBCP files an information federal income tax return. The revenue and expenses of JLS are reported on the BBCP return. As S-corporations, BBCP and JLS generally do not pay taxes. Instead, all of their tax items are allocated to BBCP's shareholders who report the items on their federal income tax returns.
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2
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CORP-INC
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12/31/2007
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Not Filed
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$100.00
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See item 1. above.
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3
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CORP-INC
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12/31/2008
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Not Filed
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$100.00
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See item 1. above.
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4
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WT-FICA
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12/31/2009
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Unassessed -
No Return
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$63,249.59
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PAID. Fourth quarter 2009 FICA was paid via ACH transfer on 12/31/2009. The return was filed on 1/12/2010, prior to the 1/31/2010 deadline.
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5
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CORP-INC
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12/31/2009
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Not Filed
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$100.00
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See item 1. above.
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6
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FUTA
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12/31/2009
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Unassessed -
No Return
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$7,034.39
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PAID. Fourth quarter 2009 FUTA was paid via ACH transfer on 2/1/2010. The return was filed on 1/12/2010.
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7
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WT-FICA
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03/31/2010
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Unassessed Liability
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$39,421.45
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PAID. First quarter FICA tax is due on 3/31/2010. JLS remits the taxes every week and has made all required payments. The return is not due yet because the quarter has not ended.
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8
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CORP-INC
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12/31/2010
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Not Filed
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$100.00
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See item 1. above.
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9
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FUTA
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12/31/2010
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Unassessed Liability
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$673.22
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PAID. This amount relates to fourth quarter FUTA for the period ending 12/31/2010. JLS remits these taxes every quarter and has made all required payments.
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|
10
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CORP-INC
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12/31/2004
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Not Filed
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$100.00
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See item 1. above.
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|
11
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CORP-INC
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12/31/2005
|
Not Filed
|
$100.00
|
See item 1. above.
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February 4, 2010
Frequently Asked Question ("FAQs") About our Bankruptcy & Our Reorganization
Many of you, our customers, vendors and business partners, have asked us questions about how the bankruptcy of Brundage-Bone Concrete Pumping, Inc., and our affiliate, JLS Concrete Pumping, Inc. (collectively, “BBCP” or the “Companies”), will affect you and your ongoing relationship with us. Some of these questions were raised on websites and blogs. Other questions have come up in telephone conversations, face-to-face meetings and other correspondence. Maintaining strong relationships with you and our colleagues in our industry is very important to us, which is why we are providing you with answers (in FAQ format) to your most frequently asked questions below. Furthermore, we encourage you to contact us if you have additional questions. We will distribute answers to your additional questions in a follow up to this FAQ.
Q. What risk am I taking if I hire BBCP while it is in bankruptcy?
A. While in bankruptcy, BBCP is operating its business as a debtor-in-possession under the supervision of the Bankruptcy Court. Our locations have not changed, our equipment and availability have not changed, and our general operational procedures have not changed. Our pre-bankruptcy management team is running the day-to-day operations of the Companies. We have approximately $15 million of interim debtor-in-possession (“DIP”) financing in place to fund our operations in accordance with a budget approved by our working capital lender, Wells Fargo Bank, National Association (“Wells Fargo”), and the Bankruptcy Court. Our employees are being paid in full and on time. We are paying all employee benefits in full and on time, including all trust fund payments for all union employees. The same insurance carriers and coverage amounts that we had in place before bankruptcy are still in place. Our fuel vendors are being paid currently. In short, with only minor disruptions (all of which are being addressed and resolved as they arise), we are operating as normal.
We know that our industry has declined substantially over the last two years – many pumping companies, including BBCP, are over-leveraged and have under-utilized equipment. We are not going to ignore the state of our industry and hope for the best. We want to be the first major pumping company to enter bankruptcy, right-size the debt on our balance sheet, right-size our equipment portfolio, better match our revenues and expenses, restructure our equity ownership and position ourselves for the turnaround in the economy. Hope is not a strategy. We are proactively positioning ourselves to get in and out of bankruptcy and return to profitability as soon as possible.
On some websites, one blogger asks the question: "Why would I use a bankrupt concrete pumping service?" For the same reasons you hired BBCP in the past -- we continue to have a nationwide footprint and strong business relationships across the country, we continue to provide excellent service to our customers, we still have the largest fleet of pumping equipment which offers customers the greatest versatility and competitive value, and we still have outstanding employees, customers, vendors and business partners and a committed management team. And, when we exit bankruptcy, BBCP will have a restructured balance sheet, a restructured income statement and a restructured cash flow statement. And, in the meantime, we have the protections of the bankruptcy process to help us get from where we are today to where we want to be when we exit bankruptcy.
Q. Are we paying all of our insurance premiums in full and on time?
A. Yes. We paid all of our insurance premiums (including all workers compensation premiums) prior to our bankruptcy filing in full and on time, and we are paying all of our insurance premiums (and related deductibles) post-petition in full and on time.
Q. Are we paying all of our employees in full and on time?
A. Yes. We paid all of our employees (salaries, hourly wages, benefits, union payments, etc.) prior to our bankruptcy filing in full and on time, and we are paying all of our employees post-petition in full and on time.
Q. Are we paying all of our fuel suppliers in full and on time?
A. Yes. We are paying all of our fuel suppliers post-petition in full and on time. We paid most, but not all, of our fuel bills prior to the bankruptcy filing. We are prohibited at this time by the bankruptcy laws from paying our remaining outstanding pre-bankruptcy fuel bills. In addition, many of the fuel vendors and other trade vendors may have reclamation claims that they can bring, which will allow the Companies to pay such claims as administrative expenses. The fuel vendors and other vendors need to decide if they believe they are entitled to this priority. The Companies issued checks to pay most of these vendors before the bankruptcy filing. Wells Fargo did not honor the checks even though the Companies had funds available in their bank account to cover the checks.
Q. Are we planning to downsize our equipment portfolio?
A. Yes. We are analyzing which pieces of equipment we will retain and which ones we will ask the Bankruptcy Court for permission to return. We will finalize that list later in the bankruptcy.
Q. Did Wells Fargo ever shut off our credit facilities or our accounts?
A. No. Wells Fargo never closed our credit facilities or our accounts.
We filed for Chapter 11 bankruptcy protection in the District of Colorado on January 18, 2010. We were in the Bankruptcy Court within 36 hours of filing for bankruptcy seeking approval of, among other things, the interim DIP financing from a private equity fund (the “PE Fund”). We negotiated that proposal with the PE Fund prior to our bankruptcy filing. Wells Fargo (and later, several other lenders) objected to the PE Fund’s interim DIP loan proposal. For several days, we operated our business using Wells Fargo’s cash collateral, pending consideration by the Bankruptcy Court of an interim financing solution. During that time, we negotiated a competing interim funding proposal with Wells Fargo, and we paid all of our employees, all of insurance premiums and all of our post-petition fuel bills, as well as other operating expenses.
The terms of Wells Fargo’s interim DIP loan proposal were more favorable to us than the terms of the PE Fund’s interim DIP loan proposal – the interest rate was lower, the fees were lower and we were able to keep our existing cash management systems in place at Wells Fargo. After discussing the competing DIP loan proposals with Wells Fargo and the PE Fund, we decided to accept Wells Fargo’s interim DIP loan proposal. It made good business sense.
The Bankruptcy Court approved Wells Fargo’s interim DIP loan proposal on January 26, 2010. This financing allows the Companies to pay their expenses in accordance with a budget submitted to the Bankruptcy Court, including expenses for payroll, taxes, fuel, trade and vendor payables, and other post-petition expenses in the ordinary course of business and consistent with our budget.
We are currently negotiating the Wells Fargo’s final DIP loan documents. The PE Fund already provided a copy of their final DIP loan documents to us. We will be negotiating those documents this week and expect to finalize them by the end of this week.
The interim financing will fund the Companies’ operations through March 1, 2010. At that time, the Bankruptcy Court will hear longer term DIP loan proposals from Wells Fargo, the PE Fund or any other parties interested in submitting DIP loan proposals to the Bankruptcy Court.
Q. Do we have enough money to operate now and pay our bills on time?
A. Yes. Wells Fargo signed off on our 13-week cash flow budget and the Bankruptcy Court approved it as part of the order approving the Wells Fargo interim DIP loan facility. Our 13-week cash flow budget is a rolling budget. We will update it weekly. We are working on our 180-day budget. We expect to complete that budget in the next week and will submit it to Wells Fargo and the Bankruptcy Court for their approvals. We have sufficient funds in our 13-week cash flow budget to pay all of our ordinary and necessary operating expenses (i.e., wages, benefits, insurance, deductibles, vendors, fuel, etc.) in full and on time.
Q. Is your private equity strategy dead?
A. Absolutely not. Nothing in our interim DIP financing documents with Wells Fargo prevents us from continuing to negotiate final DIP financing with the PE Fund or any other party interested in providing final DIP financing to us. We are free to talk with anyone we want to about final DIP financing on any terms that are in the best interest of the Companies. We are talking with the PE Fund on a regular basis, consistent with our fiduciary duties to obtain the best deal for the Companies and their creditors going forward. They have advised us that (1) they are continuing to work on their DIP loan documents and intend to file their documents with the Bankruptcy Court in time for the March 1, 2010 hearing on the final DIP financing arrangements, and (2) they are continuing to work with us on a proposed plan of reorganization of the Companies. They have reaffirmed to us their commitment to offer the Companies (subject to obtaining Bankruptcy Court approval) DIP financing on terms superior to any other DIP provider and to assist the Companies in successfully completing the Companies’ reorganization.
Q. Who is going to provide our final DIP financing?
A. We don’t know the answer to that question right now. What we do know is that Wells Fargo has told us that it intends to send drafts of final DIP loan documents to us this week. The PE Fund has already submitted to us drafts of its final DIP loan documents. No one else has approached us to date about providing final DIP financing, but it could happen.
The hearing on the final DIP financing is scheduled for March 1, 2010. We will know more about who will provide the financing and the terms of the financing as we get closer to that date.
Q. What are the Examiner and Trustee motions filed by the lenders all about? Are the things they say in those motions about the Companies’ boards of directors and management true?
A. Some of the lenders are seeking to bring an Examiner, and subsequently a Trustee, into the Companies to run the Companies. The lenders make a number of allegations against the members of the boards of directors (the “Board”) and management. They allege that the Board is deadlocked. They allege that the founders of BBCP are more interested in getting off their guarantees than they are in doing what is right for the Companies. And, they allege that management is more interested in cutting a deal for themselves going forward than they are in doing what is right for the Companies. None of these things is true. The Board voted unanimously to approve the bankruptcy filing. In fact, every matter approved by the Board in the past 24 months has been approved unanimously. That doesn’t sound like a deadlocked Board. To the Companies’ knowledge, the founders do not have a binding deal with anyone about getting off their guarantees. And, similarly, management does not have a binding deal with anyone about their role with the Companies going forward. The Board and management made the decision to file for bankruptcy because they believed, consistent with their fiduciary duties and in the exercise of reasonable business judgment, that filing for bankruptcy was the right thing to do for the Companies. The lenders may disagree with the Board’s and management’s decisions, but that disagreement is not, in and of itself, grounds for appointment of an Examiner or a Trustee. Moreover, allegations are just that - allegations. As Judge Campbell said with respect to these two motions (and we are paraphrasing – Judge Campbell said this much more eloquently), uncorroborated allegations don’t carry any weight until live testimony is put on and the persons making the allegations are subject to cross-examination. Until that occurs, allegations are just one person’s unproven statements. We are confident that our testimony on these issues will refute the lenders’ allegations and that we will prevail on our opposition to the two motions.
Q. What is our plan or reorganization going to look like?
A. It’s too soon to tell. Our plan of reorganization will start to take shape after we finalize our longer-term DIP loan arrangements.
Q. There are a lot of ugly, nasty statements being made about the Companies on the blogs and elsewhere. Do we intend to do anything about it?
A. Yes. We plan to seek the help of the courts in putting an end to any libelous or slanderous statements being made about us on the blogs and elsewhere. We plan to aggressively pursue legal action against any party that publishes libelous or slanderous remarks about the Companies.
Q: If you are in bankruptcy, why did management use the Companies’ money to travel to World of Concrete (“WOC”)?
A: Management did not use the Companies’ money to travel to WOC. Senior management believes that WOC is an important annual event for all of us in the industry. Now that the Companies have filed for bankruptcy protection and started the reorganization process, we believe that we should use the Companies’ resources solely to strengthen our business and in accordance with the Bankruptcy Court. That is why, this year, the Companies did not pay for management members to attend WOC. Our management members believe in the future of the Companies and the importance of attending WOC, which is why they attended WOC at their own expense.
Q: All of the units of equipment listed in the Chapter 11 filing are leased or financed. Why is there debt associated with every single one of these units?
A: The bankruptcy petition and related schedules identify those units of equipment that are leased or financed, along with the name of the related creditor. This is done in Schedule D to the bankruptcy petition. All of the equipment, whether it is owned outright or financed, is listed on another schedule, Schedule B. If you compare these schedules, there are many pieces of equipment that are not leased or financed.
Q: Where can I get more information?
A: We invite you to visit our website (http://www.brundage-bone.com/BBCP/index.cfm, click on the link titled “Restructuring News”) for periodic updates of our bankruptcy and restructuring. For direct access to filings in the bankruptcy case, please visit http://chap11.epiqsystems.com/docket/docketlist.aspx?pk=3562a12d-e15f-432b-ac4e-7a30eaff9555.
January 27, 2010
Brundage Bone Restructuring Facts
Brundage-Bone has been the subject of blog postings on the web, many of which contain incomplete or inaccurate information, and most of which contain “spin” or drive an agenda. Brundage-Bone wants to take this opportunity to set the record straight, and to provide accurate information about its restructuring and its bankruptcy.
On January 18, 2010, Brundage-Bone and its affiliate, JLS Concrete Pumping, filed for Chapter 11 bankruptcy protection in the District of Colorado. At that time, a private equity firm offered to put in place interim post-petition financing for Brundage-Bone. The Company’s lenders opposed that proposal, and for several days, Brundage-Bone operated its business using cash collateral of Wells Fargo, pending consideration by the Court of an interim financing solution. During that time, we paid all of our employees, and paid our post-petition insurance premiums and fuel bills, as well as other operating expenses.
This week, Wells Fargo offered up its own interim financing proposal on more economically favorable terms than the financing offered by the private equity fund. Yesterday, the Bankruptcy Court approved Wells Fargo’s interim financing proposal. This financing allows the Company to pay its expenses in accordance with a budget submitted to the Bankruptcy Court, including payroll, taxes, fuel, trade and vendor payables, and other post-petition expenses in the ordinary course of business and consistent with our budget.
The interim financing provided by Wells Fargo will fund the Company’s operations through March 1, 2010. At that time, the Court will hear longer term debtor-in-possession financing proposals by the Company’s current lender, the private equity fund or any other financing proposals submitted to the Court at that time.
We invite you to log onto our website in the future (http://www.brundage-bone.com/BBCP/index.cfm, click on the link titled “Restructuring News”), where we will provide you with accurate and truthful updates of events that occur in our bankruptcy and restructuring.
The Company has identified to you that it posted this blog. We ask each blogger who comments on, or posts information about, Brundage-Bone or the bankruptcy to also provide his or her name, and accurate and truthful information, so that we are all working with transparency, rather than hiding behind anonymous login names.
Thank you for your continued support – we will see you at World of Concrete.
-- Senior Management of Brundage-Bone and JLS