Consolidated Freightways Discontinues Operations
Consolidated was expected to file petitions for Chapter 11 bankruptcy in the central district of California yesterday. The company said in a statement that about 15,500 employees are affected and about 80 percent will receive termination notices immediately.
In letters mailed to each employee yesterday, the company also said it had "been vigorously exploring ways to restore the financial health of the company." It also said it lacked the resources "to sustain the business without additional financial resources." The letters said Consolidated Freightways has discontinued operations and all CF terminals are closed.
Until recently, the company said, it was hopeful it could secure additional financing but that when one of its bondholders canceled coverage related to the company's self-insurance programs for workers' compensation and vehicular casualty, it hurt discussions with all lenders and investors. The company was unable to secure financing and to bridge the surety bond gap. The company also expected a second insurer to cancel coverage.
Reportedly, Consolidated has lost money for seven consecutive quarters and is one of the few companies that was unable to vouch for the accuracy of its financial results last month, as requested by the Securities and Exchange Commission.
Operations of the company's CF AirFreight and Canadian Freightways Ltd. subsidiaries are continuing normally, and their employees will not be terminated from this action. However, the company plans to reorganize the CF AirFreight business, which is included in the Chapter 11 filing, the company said. Canadian Freightways is not part of the filing because there is no such designation in Canada.
The company said that its information systems will continue to operate, and customers will have visibility of their shipments up to where they are delivered. In addition, customers may continue to trace all shipments on the Consolidated Web site.