The Celadon Bankruptcy: What Happened
News of Celadon Group, Inc. filing for Chapter 11 bankruptcy protection Monday, December 9, 2019 rocked the trucking industry. The move put nearly 4,000 employees out of work, including nearly 3,000 truck drivers and affected 25 affiliate companies. Truck drivers, especially, were hit hard as many were informed mid-run to deliver their loads and turn in the company’s trucks. For some drivers that meant scrambling to find some means of getting home. In the aftermath, many truck driver websites and groups have stepped up to help out in any way possible. Some have offered assistance with getting home. Others have reached out to truck driver recruiters on behalf of their newly unemployed brothers and sisters.
Celadon’s bankruptcy left many in the trucking industry wondering what happened to cause the shuttering of a truck leasing giant. For others it was no surprise. Chief Executive Officer Paul Svindland, who bought the firm in 2017, said the company’s challenges were too great to overcome.
In July 2018, Celadon admitted that it was under criminal investigation by the Department of Justice and Securities and Exchange Commission for financial reporting issues. On April 25, 2019, the DOJ announced that a settlement had been reached in which Celadon would, among other things, pay $42.2 million to settle the investigation. Allegations were that a prior management team and a subsidiary, Quality Companies, filed false and misleading statements to investors regarding tractors and trailers leased to owner-operators.
"Celadon has faced significant costs associated with a multi-year investigation into the actions of former management, including the restatement of financial statements. When combined with the enormous challenges in the industry, and our significant debt obligations, Celadon was unable to address our significant liquidity constraints through asset sales or other restructuring strategies,” Svindland said.
In early December, William Meek, former COO, and Bobby Lee Peavler, former CFO, were indicted on conspiracy and other charges by the DOJ. According to the indictment, they knew the value of a substantial portion of Celadon’s trucks had declined and that many trucks had serious mechanical issues that made them unattractive to drivers yet conspired to make false statements to the company's accountants and falsify records for allegedly concealing millions in losses from shareholders and lenders.
Svindland said “therefore in conjunction with our lenders, we concluded that Celadon had no choice but to cease all operations and proceed with the orderly and safe wind down of our operations through the Chapter 11 process.”
Celadon immediately closed all of its operations except its Taylor Express headquarters in North Carolina. The company said that location will continue to operate as it explores the possibility of a sale.Celadon’s truck drivers and administrative staff were informed that they will lose health insurance and will not be paid for unused vacation time.
Trucking industry experts believe that other trucking markets will fill the void left by the Celadon’s closure. Truck drivers are encouraged to explore the numerous free online support groups that have popped up for assistance with COBRA coverage, filing for unemployment, and finding their next driving job.