[__coaxialcabal]

1.1B in NOLs. How does this not become a $200MM acquihire by UPS pre-bankruptcy? I’m asking because I would assume that the tax mitigation could be an asset and feel like I am missing something. I am not an accountant, but would love for one to explain why bankruptcy is the best choice.

[Johnie]

Because they have a pretty significant outstanding lending portfolio that they are on the hook for. See: https://twitter.com/adam_keesling/status/1715063558898364602...

Convoy effectively got into the factoring business and extended short term (30/60/90 days) loans to the trucking companies. Now, they don't hold these loans on their balance sheet but rather package them and sell them to lenders as asset-backed lending portfolio.

The thing with these is that typically the originator (in this case Convoy) will need to take the first tranche of losses. (This is where the $240M debt facility came in). As the freight market deteriorated, Convoy was effectively margin called by the lenders and could not come up with the money.

Any acquirer would then have to take up this debt. Even though Convoy may have a valuable asset, UPS is not in the business of managing a debt portfolio. Any acquirer would be dissuade by this baggage.

[__coaxialcabal]

Thank you so much for the detailed response. This makes perfect sense.

[floxy]

Why would UPS be interested? They just sold of their freight division to T-Force in 2021.