By Jim Utter
Director of Journalism
One of the country’s largest privately held car wash operators has voluntarily entered Chapter 11 bankruptcy in hopes of greatly reducing its debt obligations.
ZIPS Car Wash, with the support of its existing lenders and equity holders, filed voluntary Chapter 11 cases this week in U.S. Bankruptcy Court for the Northern District of Texas.
The move was not unexpected as multiple reports over the last month indicated the company was looking for rent concessions from some landlords as well as potentially selling off sites. The Atlantic Street Capital-backed company had been in negotiations with lenders including HPS Investment Partners, PennantPark Investment Corp. and Brightwood Capital Advisors.
The first hearing on the case is scheduled today (Feb. 7) before Judge Michelle V. Larson in Dallas, Texas.
ZIPS announced on Wednesday night it has agreed to the terms of a restructuring plan with a group of its existing private lenders that will strengthen its balance sheet and position the company for stability and long-term growth.
According to the 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.”
To fund operations during the Chapter 11 cases, ZIPS is seeking approval of a $30 million new money debtor-in-possession (“DIP”) financing package. Following court approval, the company anticipates the DIP financing will provide sufficient liquidity to support its operations during the Chapter 11 process.
“Today’s announcement represents a significant step forward in our efforts to position ZIPS with the necessary financial and operational foundation to drive long-term success,” Kevin Nystrom, Chief Transformation Officer of ZIPS, said in a statement.
“As we work with our financial partners to swiftly complete our financial restructuring, we remain wholly focused on supporting our teams and delivering the exceptional service our valued customers have come to expect.”
The company said it expects to emerge from Chapter 11 in two to three months under the ownership of its existing lenders.
ZIPS Car Wash, including its brands Rocket Express Car Wash and Jet Brite Car Wash, will continue to operate in the ordinary course of business during the Chapter 11 cases, including continuing to pay employee wages and benefits, maintaining customer programs, and honoring obligations to vendors, according to the company’s statement.
As part of its financial restructuring process, ZIPS will continue to “assess its operational footprint, and right-size and optimize its portfolio.”
As recently as last June, Atlantic Street had invested an additional $70 million in the company. The private equity firm, which focuses on smaller middle-market companies, first invested in ZIPS in May 2020 and increased its investment again in 2022.
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 has been a prime example of a private equity-fueled boom in car washes across the U.S. in the last five years.
SOURCE: ZIPS Car Wash
