A federal bankruptcy court judge today granted Bison Building Materials' opening requests under Chapter 11 protection, set a final hearing for July 15, and extended until Aug. 27 the deadline for Bison to reveal its financial plans and list of top unsecured creditors.
Judge Wesley W. Steen's actions in U.S. Bankruptcy Court in Houston came three days after Bison filed for protection from creditors under Chapter 11 of the federal bankruptcy statutes. That made the Houston-based dealer the third company in the top 15 of the ProSales 100 to file Chapter 11. While 14th-ranked Bison was beginning its Chapter 11 process, Stock Building Supply, No. 2 on the ProSales 100, emerged from nearly two months in Chapter 11, while No. 6 Building Materials Holding Corp. remains under the bankruptcy court's shield.
Attorneys for Bison won at today's hearings the kind of permission that typically make up what are called "first day" matters in Chapter 11. These include the ability for Bison to continue using its bank accounts, business forms, and cash management system; to keep paying wages and benefits to employees; to bar utilities from altering and cutting off service; and to use debtor-in-possession financing that Bison had set up before entering Chapter 11.
Had it not received a delay, Bison would have had to file a statement of financial affairs and a list of top unsecured creditors by July 13. It asked to do so instead on Aug. 27 on the grounds that Bison is a large, complex company and has limited staff to do this work. It also won permission to provide one consolidated list of its top 30 creditors rather than top 20 lists for each of its several operating units.
Bison said in an earlier filing that it filed for Chapter 11 protection in part because of the financial difficulties it incurred while retrenching following a period in the late 1900s and earlier this decade in which it sought to move far beyond its Houston base. At its peak it had operations in markets such as Phoenix, Las Vegas, and Denver, employing a total of 1,350 people. Since then, "the core operations at Bison Materials LLC [serving greater Houston] have continued to be successful, while the non-core operations have been a disaster," Bison president Pat Bierschwale said in a declaration filed Sunday.
For instance, in the fiscal year ended April 30, 2006, the core operations recorded a $10.4 million net profit on $293.4 million in revenue, but the non-core part of Bison posted a $2.7 million net loss on $107.9 million worth of sales. Bison's Houston-area core operations didn't swing to a loss until the fiscal year ended last April 30, when the core businesses recorded a $4.7 million loss on $179.1 million in revenue. But during that same period, the non-core operation's net loss swelled to $11.4 million on just $34.9 million in revenue.
While in Chapter 11, Bison will ask the bankruptcy court to reject a number of real estate and equipment leases, largely related to operations its has closed. Bierschwale said in his statement that Bison has had trouble subleasing properties and getting out of leases because the Las Vegas and Phoenix markets where the properties are located are "some of the most toxic real estate markets in the United States."
"The Debtors are now being sued in multiple locations throughout the United States by former landlords," Bierschwale's statement said. In May, the statement added later, "management decided it was not possible to continue to pay the lease rentals attributable to the discontinued operations and ceased making those payments."
Bison also noted that credit problems contributed to its need to file for Chapter 11. In November 2005, Bierschwale's statement said, Bison entered into an amended credit agreement led by Wachovia Bank that provided a $70 million revolving credit facility and a $4.44 million term loan. But over the years, as the housing recession deepened, Wachovia reduced the limit on that revolving facility to $60 million in July 2007, $50 million in December 2008 and $30 million in March 2009.
"The cumulative impact of this reduced liquidity available to the Debtors, in conjunction with reductions in revenues in the Debtors' core area attributable to the slowdown in housing starts, the negative impact of the Debtors' ill-timed expansion, the associated litigation from landlords and others resulted in the Debtors' decision to file for [Chapter 11] protection," Bierschwale's statement said.
In a press release issued Monday, Bison said it has realigned its operations "to focus exclusively on lumber distribution and value added products and services including millwork, engineered wood products, pre-manufactured framing products, windows and installed insulation. Additionally, Bison has expanded its product offerings to include commercial grade doors and hardware and concrete accessories. Bison remains focused on its key customer base that includes high volume production builders, custom builders, multifamily apartment builders, light commercial builders and the associated trades. Geographically, Bison will continue to focus on its core markets that include the greater Houston area and Beaumont."
The company's two-year restructuring effort is virtually complete, COO Tom Tolleson told ProSales in an interview on Monday, adding: "We don't anticipate any further operational adjustments," including making any more cuts in facilities or in Bison's 556-person workforce.