Sirva files bankruptcy

Westmont-based Sirva Inc., the moving company doing business as Allied Van Lines Inc. and North American Van Lines Inc., filed a pre-negotiated bankruptcy for itself and 58 affiliates, citing the slowing housing market.

Sirva, which operates in 45 countries, said in a petition filed Tuesday in bankruptcy court in Manhattan it has more than $1 billion in debt. Under the so-called pre-packaged Chapter 11 filing, the company will fully repay most creditors through a debt-restructuring deal with lenders and will continue operating. The company cited higher borrowing costs and falling home prices.

"Customers are simply not moving as much," Douglas Gathany, senior vice president and treasurer of DJK Residential LLC, a New York based Sirva affiliate, said in court documents. He added consumers are delaying moves because they can't sell their homes.

As part of its services to corporate clients, Sirva helps manage employee relocation programs, including helping the customer's employees sell their houses, move and buy new homes, often buying the home for later sale. Under some of the contracts which work on a fixed fee, Sirva agrees to buy the home if it isn't sold within a pre-determined period. It also assumes costs and losses on a resale of the home.

Their "home inventory is growing," Gathany said. "The homes stay in inventory longer, and many homes must be sold for a loss."

As the company recorded operating losses over the past four years, it used credit from a revolving facility and negotiated amendments that pushed its borrowing spread up by 575 basis points. Annual interest fees on Sirva's debt went from $18 million in 2004 to $67 million in 2007.

The prepackaged reorganization plan, approved by more than 96 percent of major creditors, will reduce the parent company's debt by about $200 million and its annual interest payments by $54 million, Sirva said.