Rail supplier files for Chapt. 11

RailWorks acts after reporting $38.1 million loss

No layoffs expected

September 22, 2001|By Ted Shelsby | Ted Shelsby,SUN STAFF

RailWorks Corp., once a rapidly growing supplier of services to the railroad industry, announced yesterday that it had succumbed to a series of financial troubles and filed for Chapter 11 bankruptcy protection.

The move comes a month after the Baltimore-based company reported a $38.1 million second-quarter net loss that violated terms of its bank loans.

In its filing at the U.S. Bankruptcy Court in Baltimore, the company listed assets of $569.6 million and liabilities of $523.2 million as of June 30.

RailWorks has about 2,600 workers in the United States and Canada, including 25 at its corporate headquarters here.

Stephanie Cohen Glass, a spokeswoman, said RailWorks does not anticipate any layoffs as a result of the bankruptcy filing.

In announcing its filing, RailWorks said members of its existing credit group have agreed to provide up to $165 million in credit and bond financing, subject to bankruptcy court approval.

"Through reorganization, we believe, RailWorks will emerge from bankruptcy stronger and continue to be a leading supplier of rail-related services and products," said John Kennedy, RailWorks' chief executive.

The bankruptcy filing did not come as a big surprise.

"I anticipated it," said Arthur W. Hatfield, an analyst with Morgan Keegan in Memphis, Tenn. "That's why I dropped them several months ago."

Last month the company said it did not expect to be able to make a $10 million bond interest payment due Oct. 15 or be able to continue financing operations without major concessions from its lenders.

It also announced the resignation of its chairman and president and named Norman Carlson as nonexecutive chairman of the board. Carlson was formerly with the accounting firm Arthur Andersen, where he served as worldwide managing director of the transportation industry practice.

In an attempt to raise cash, RailWorks in June sold most of its interest in its Houston-based W.T. Byler LP construction and maintenance equipment division. The sale generated $13 million in cash, which was used to pay down debt.

Glass said the company and its subsidiaries will continue to operate normally, but the company will evaluate strategic alternatives. She declined to say if that that included additional sales of assets.

Before trading was halted yesterday by the Nasdaq stock market, RailWorks shares were at 18 cents.

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