Bison Building Materials, citing the double whammy caused by an ill-fated expansion and a credit squeeze from its main bank, filed Sunday for Chapter 11 bankruptcy, making it the third company in the top 15 of the ProSales 100 to seek federal protection from creditors in the past two months. Initial motions--including a request to delay an enumeration of Bison's largest unsecured creditors--will be heard Wednesday at U.S. Bankruptcy Court in Houston.
Bison said in a press release issued late Monday that had filed for Chapter 11 protection the day before as part of its retrenchment 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 (see "Roll of the Dice," ProSales'July 2006 article on the expansion), 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.
As with America's second-biggest LBM operation, Stock Building Supply, which filed for Chapter 11 on May 6, and No. 6 company Building Materials Holding Corp., which sought Chapter 11 relief on June 16, Bison filed for bankruptcy in large part because it is seeking to get out from under real estate and equipment leases, largely related to operations its has closed.
"Since most of the Debtors discontinued operations are in markets such as Las Vegas and Phoenix, some of the most toxic real estate markets in the United States, the Debtors' effort to sublease premises or otherwise mitigate damages of landlords have been largely unsuccessful," Bierschwale's statement said. "The Debtors are now being sued in multiple locations throughout the United States by former landlords." 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."
But Bison also notes 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.
Bison has arranged debtor in possession financing with Wachovia, chief operating officer Tom Tolleson told ProSales late Monday.
In Monday's press release, 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, Tolleson told ProSales, adding: "We don't anticipate any further operational adjustments," including making any more cuts in facilities or in Bison's 556-person workforce.