Dive Brief:
- Kal Freight filed for Chapter 11 bankruptcy protection in Texas last week, blaming an unsuccessful expansion of the company’s parts and tires businesses for sinking its profitability.
- The carrier petitioned the court to allow it to reorganize its “core trucking business and to winddown their noncore parts and tires businesses and liquidate certain real estate assets,” a court presentation said.
- Bankruptcy hearings are continuing throughout December, putting further legal pressure on the company’s owner and president, Kalvinder Singh.
Dive Insight:
The company seeks to use the bankruptcy process to finance operations as part of its restructure.
Kal Freight, along with Kal Trailers, Kal Partz and KVL Tires, have approximately $329 million in indebted financing, according to the court presentation.
The company’s business challenges came amid the freight market downturn as well as rapid expansion in 2021 to purchase trucks, trailers and property.
“Starting in 2020, the Company unsuccessfully expanded non-core parts and tires business, causing a substantial drain on profitability,” the presentation said.
Kal Freight was founded in 2014, but its affiliates launched in 2020 and 2021. The businesses have approximately 61 employees and around 1,100 independent contractors, and Kal Freight has about 800 drivers and trucks, the presentation said.
Singh and his brother have also been involved in a legal dispute in California. The brothers face allegations of fraud, breach of fiduciary duty and breach of contract in a San Bernardino County lawsuit filed in September, according to a statement from the company’s chief restructuring officer.
The Singhs have denied the allegations.
Bankruptcies for U.S. businesses saw a rise in cases this year. In trucking, market rates have roiled firms trying to stay afloat.
