On September 15, 2008, Motor Coach Industries International (“Motor Coach”) filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware. Motor Coach designs, manufactures and sells motor coaches throughout the United States and Canada. At the time it filed for bankruptcy, Motor Coach had 750 employees on its payroll with manufacturing facilities in Winnipeg, Canada and North Dakota. Motor Coach also operates nine sales centers throughout the United States and Canada.
Although Motor Coach generated $644 million in revenue for 2007, this amount represented a decline of $82 million from the previous year. Motor Coach’s loss of revenue was the result of a 20% decline in its private sector sales, compounded by lower sales to its public sector customers. Fluctuations in the U.S.-Canadian exchange rate compounded Motor Coach’s problems. Each year, Motor Coach purchases $200 million in Canadian dollars to fund its Canadian operations. Appreciation by the Canadian dollar in 2007 decreased the company’s cash flow by $30 million. Like many manufacturers, an increase in commodity prices in 2008 further eroded Motor Coach’s profitability.
One of Motor Coach’s primary objectives in bankruptcy is to reduce its debt by $300 million. In order to do so, Motor Coach is in negotiations with its pre-bankruptcy lenders to gain support for restructuring its debt. By reducing interest payments, Motor Coach hopes to improve cash flows and implement its business plan.