Troubled ELD provider Rand McNally sold out of bankruptcy

Documents also indicated Rand McNally was carrying debts in excess of $58 million. 

The bankruptcy process has revealed that Rand McNally is in a weak financial position. While that might be obvious for a company operating under Chapter 11 protection, the bankruptcy filing was actually submitted in 2018 by several units of a holding company called Zohar, which had been controlled by legendary investor Lynn Tilton. Tilton, in turn, put in a last-minute bid to acquire Rand McNally for her Patriarch Partners investment vehicle. She is no longer with Zohar. 

Rand McNally’s court-appointed chief restructuring officer,  Michael Katzenstein of FTI Consulting, had recommended that the provider of a variety of navigation services for the trucking and transport sector be sold to Teleo Capital Management, a private equity company that has one investment in logistics. That company, Paxia Inc., “manage(s) the inflight catering services supply chain for the world’s largest airline carriers and catering businesses,” according to the Teleo webpage.

In a court filing backing the purchase of Rand McNally by Teleo, Katzenstein discussed the financial status of the company. It isn’t good.

During due diligence for the sale, Katenzenstein said Rand McNally “continued to face liquidity pressure and was forced to conserve cash.” “These liquidity constraints are exacerbated by the fact that Rand currently has no availability on its existing financing,” Katzenstein wrote in the document, filed with the court on Sept. 25.

One of the reasons that Katzenstein said he was backing the Teleo sale was that it “can close in a relatively quick period,” he wrote. “This is particularly important given Rand’s capital assets and needs,” he added.

A “substantial delay” in closing the Rand sale would “likely adversely impact Rand’s business operations.” 

In a court order earlier this week ordering the sale to Teleo, the court said that “time is of the essence in closing the sale and the Debtors and the Buyer intend to close the sale as soon as possible.”

Earlier, Katzenstein wrote that Teleo’s offer had a 45-day limit. 

The process for completing a Rand McNally sale was complicated by the emergence of Tilton as a buyer. Tilton had created the Zohar funds that now own Rand McNally, and she was at their helm when they filed for bankruptcy in 2018. 

According to media reports, her bid for Rand McNally was $46 million, which on the surface exceeded the $15 million to $30 million figure referenced in the court document as what the sellers of Rand McNally would receive in the Teleo transaction. Her bid was further complicated by the fact that Tilton and Patriarch have claims against Rand McNally. 

Fred Vescio, managing director of Houlihan Lokey Capital and adviser to debtors and debtors in possession, said in a court document that the Tilton bid was at a “nominally higher stated purchase price than TELEO’s stated purchase price.” But he added that it “had various economic terms that would serve to reduce the stated purchase price.”

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