Performance Transportation lenders asks court to force company to provide documents

By Reshmi Basu

New York, Dec. 18 - Performance Transportation Services, Inc.'s (PTS) second-lien lenders asked the U.S. Bankruptcy Court for the Western District of New York to force the company and related parties of interest to produce documents that the lenders believe are necessary to show that the company's controlling shareholders manipulated the bankruptcy process for their own benefit.

In a motion filed Tuesday, the lenders, D. E. Shaw Laminar Portfolios, LLC and Quadrangle Debt Recovery Advisors, LP, seek discovery from certain directors of the company, from the company's controlling shareholders, private equity firms Yucaipa American Alliance Fund I, LP and Yucaipa American Alliance (Parallel) Fund I, LP, from the company's principal competitor and Yucaipa affiliate, Allied Systems Holdings, Inc., and from the lead arranger and initial agent of the company's secured debt, Goldman Sachs Credit Partners, LP.

Allied Systems has recently exited Chapter 11, during which Yucaipa emerged as its largest stockholder, the lenders noted in the court papers. The private equity firm was also very visible during Performance Transportation's Chapter 11 case.

"Since seizing control of Allied six months ago, Yucaipa has been on a mission to merge Allied and PTS. Yucaipa now controls both Allied and PTS, the two largest players in the autohaul industry, and three members of PTS's board of directors are also members of Allied's board of directors," the lenders alleged in the motion.

The lenders argue that Performance Transportation's Chapter 11 case is "replete with conflict of interests" and that discovery is critical in order to explore how those conflicts impacted the ability of the company's board of directors to execute their fiduciary duties.

A hearing is scheduled for Jan. 18.

Performance Transportation Services is a Detroit-based transporter of new automobiles, sport utility vehicles and light trucks. Its Chapter 11 case number is 07-04746.

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