A U.S. bankruptcy judge has given conditional approval to ZIPS Car Wash’s Chapter 11 restructuring plan and set a creditor vote for next month.
ZIPS, one of the country’s largest privately held car wash operators, voluntarily filed for Chapter 11 bankruptcy in early February in hopes of greatly reducing its debt obligations.
Following a hearing on Tuesday, U.S. Bankruptcy Judge Michelle V. Larson for the Northern District of Texas issued orders giving conditional approval to ZIPS’ Chapter 11 disclosure statement and plan voting procedures, which included a deal reached between unsecured creditors and the debtor.
The creditors vote has been set for April 10. If approved, the Court said by no later than April 21, it shall have entered an order confirming the plan (which order may also be a final order approving the disclosure statement), and by no later than April 30, the effective date of the plan shall have occurred.
The Court set an omnibus hearing for April 16 on granting Chapter 11 treatment and a combined hearing for April 18 for approval of the disclosure statement.
According to the original court filing, ZIPS has $654 million of total funded debt. Through the plan, ZIPS expects to reduce its debt obligations by approximately $279 million and secure $15 million of new capital to support the restructured business and “future strategic initiatives.”
Tuesday’s order included conditional approval of ZIPS’ plan to fund operations during the Chapter 11 cases with a $30 million new money debtor-in-possession (“DIP”) financing package.
Also Tuesday, a committee representing ZIPS’ unsecured creditors announced it had reached a deal with ZIPS that will set aside $2.5 million for unsecured claims, plus 25 percent of planned real estate sales (capped at $2.5 million).
ZIPS originally said it planned to use the bankruptcy to negotiate car wash site leases and on Tuesday the company’s counsel said ZIPS had secured new deals with 25 of its landlords and was close to agreements with up to 15 additional sites.
ZIPS, headquartered in Plano, Texas, was founded with its first site in Arkansas in 2004, and now operates approximately 260 locations across 23 states under three brands: ZIPS, Rocket Express and Jet Brite.
Its expansion had been a prime example of a private equity-fueled boom in car washes across the U.S. in the last five years.
ZIPS has also been selling off some of its sites in recent months, including six sold to El Car Wash in mid-February as part of a $50 million combined nine-site acquisition deal.
