Greyhound Lines Inc., crippled by a strike since early March, yesterday filed for bankruptcy protection from its creditors, a move that raised the possibility that thousands of communities ultimately could be left without intercity public transportation.
J. Michael Dolan, Greyhound's chief financial officer, said the company took the action because it feared suppliers that are owed money might start confiscating its buses and terminals. The Dallas-based company filed for protection in the U.S. Bankruptcy Court for the Southern District of Texas in Brownsville. Under Chapter 11, a company continues to operate under court supervision while it attempts to work out a plan for repaying its debts.
Greyhound officials said the filing would not affect service, which has been cut back since the company started using replacement drivers. The company immediately won permission from the bankruptcy court to honor tickets already purchased.
Greyhound's fate, however, is now in the hands of its creditors, who could petition the court to close down the company and sell all its assets in an effort to collect their money.
The filing came just a week after the Amalgamated Transit Union, which represents Greyhound's striking drivers, approached the company about a possible employee buyout. The 6,300 ATU drivers struck Greyhound March 2 in a dispute over a new contract. Greyhound said last night it was not interested in an employee buyout but was concentrating instead on its own financial restructuring.
The union had no immediate comment on the bankruptcy filing.
At the time of the strike, Greyhound Chairman Fred G. Currey said the walkout would be "irrelevant" by the end of March because the company was hiring replacement drivers. By the end of the first quarter, Greyhound reported a loss of more than $50 million.
Greyhound was the second major transportation company forced into bankruptcy protection by striking unions in the last year. Eastern Air Lines filed for reorganization a year ago when a machinists' strike crippled its operations. Two months ago, the bankruptcy court threw out the airline's management and placed the airline under trusteeship.
Unlike Eastern, which is one of many airlines serving the nation, however, Greyhound is the only nationwide intercity bus company. At the time of the strike, it served nearly 10,000 communities, about half of which have no other form of intercity public transportation. The company maintains it has managed to restore at least some service to all but a few hundred communities using 3,700 replacement drivers. The ATU has disputed the level of service claimed by the company.
Underscoring Greyhound's bankruptcy action, company spokesman George Gravely said last night that "there were troubling sounds coming to us. There was a concern about losing a substantial number of our newest buses that we now have on lease." Gravely said that if the company were to lose 500 of its newest buses it would have a hard time continuing in operation. The company operates 3,800 buses.
Currey led a group of investors who bought Greyhound three years ago for $270 million. A year later, in a second leveraged buyout financed largely by so-called junk bonds (high-risk, high-yield bonds), the group purchased the Trailways bus company for $80 million. Since then, Greyhound has been struggling to make a profit while paying off its massive debt. Two weeks ago, Greyhound offered to repurchase $225 million of the junk bonds at a deep discount, but needed the money to finance the buyback. Gravely said last night there had been no takers for the offer, which expires June 18.