California-based transportation and logistics company Kal Freight filed for Chapter 111 bankruptcy in the United States Bankruptcy Court for the Southern District of Texas on December 5, 2024. The company filed the Chapter 11 bankruptcy with four of its affiliates.
The Wall Street Journal reports that the company filed for bankruptcy protection because its financial condition was severely affected by its unprofitable efforts. Additionally, investment in more vehicles during the pandemic has also led to its present situation.
As the pandemic waned and freight demand dropped, the company struggled to cover its expenses. Rising diesel prices, higher interest rates, and an oversupply of trucks and drivers further exacerbated its financial difficulties.
Owned by Kalvinder Singh, the logistics company plans to use debtor-in-possession financing during this phase to maintain operations, implement restructuring initiatives, and position itself for long-term success. Employees, vendors, and suppliers in Kal Freight will be paid without deductions for their services.
Bradley D. Sharp of Development Specialists, Inc. has been appointed chief restructuring officer. In addition to assisting customers and trade partners, Kal Freight would take care of employee and fleet safety. During this period, Pachulski Stang Ziehl & Jones will act as the legal counsel.
The transportation company reportedly owes nearly $325 million to creditors like Bank of America, TBK America, and Daimler. However, according to Chief Restructuring Officer Bradley Sharp, these new ventures faced operational challenges, leading to disputes with business partners.
Which other logistics companies have filed for bankruptcy besides Kal Freight?
Reportedly, logistics and trucking have been under massive recession since 2022, which has led to severe distress among companies like Kal Freight. Although many have filed for bankruptcy, others had to shut down.
On November 1, 2024, Miami-based Star Transportation PA, with its five affiliates, filed for Chapter 11 bankruptcy. The decision came after a company’s lender ordered a repossession of 47 trucks. Similarly, Illinois-based Mighty Move Transportation filed a Chapter 7 liquidation on October 24, 2024.
Sunset Logistics from Texas filed for Chapter 7 bankruptcy with its affiliates for liquidation of assets and closure of operations.
Established in 2014, Kal Freight operates across the nation and has warehouses and terminals in California, Texas, New Jersey, and Indiana. It has more than 700 trucks supported by 800 drivers. The number of trailers goes beyond 2,000.
In 2020, it expanded into new business lines, including Kal Partz for aftermarket truck and trailer parts, Kal Trailers, and KVL Tires, offering online and physical retail services. Moreover, in 2021, the logistics company purchased six lots of 15.27 acres in Springdale for seamless operations of its subsidiaries Kal Trailers & Leasing, Kal Tire, and Kal Partz.
In the light of bankruptcy, Kal Freight's debtor has filed motions to use its cash collateral and continue operating under its factoring and security agreement with Triumph Business Capital, but it has not requested debtor-in-possession financing. It plans to reorganize and restructure its business during the Chapter 11 process while winding down operations for Kal Partz and KVL Tires.