Red River Waste Solutions, the city's trash hauler, has filed for Chapter 11 bankruptcy on $31 million in debt.
Red River has been Fort Wayne's trash hauler since 2018, and residents and elected officials have criticized the company for missed trash pickups and poor service numerous times. In 2017, Red River had the lowest bid for trash service at $4.9 million, which was almost $1.5 million less than the city's contractor at the time, Republic Services.
The City Council lists a presentation from the Solid Waste District and Red River on the agenda for its 5:30 p.m. meeting Tuesday.
Chapter 11 bankruptcy is known as the “reorganizational” form of bankruptcy because it involves the company reorganizing its affairs, debts and assets as it retains control over operations. Unlike if it had filed Chapter 7 bankruptcy, Red River won't have to liquidate its assets.
Red River Waste Solutions LP filed for bankruptcy Thursday in U.S. Bankruptcy Court for the Northern District of Texas. The company is based in Dripping Springs, Texas, but also has locations in Fort Wayne; Del Rio, Texas; Fort Knox and Hardin County, Kentucky; Huntsville, Alabama; and Nashville and Union City, Tennessee.
As of Oct. 11, Red River has $31.1 million in total debt funded obligations, according to a declaration filed by James Calandra, managing director of CRS Capstone Partners LLC and the proposed chief restructuring officer for Red River.
“Absent the filing of this Chapter 11 case and the forthcoming restructuring and/or sale, it appears that the debtor's business will continue to deteriorate,” the declaration stated.
Based on Capstone's review of financials, Calandra wrote that the losses sustained by the company because of the COVID-19 pandemic, “combined with a high degree of leverage,” led to filing Chapter 11 bankruptcy. The company employs about 200 people, according to court records.
The declaration also set up Weldon Smith as an immediate lender for debtor-in-possession financing. Smith, whose 2012 trust is listed as having about 11% ownership interest in the company, will lend Red River $500,000 in a new line of credit, which will aid the company in meeting its short-term operational needs, according to court documents.
No hearings had been set as of Friday.
Red River benefited from the first-round Paycheck Protection Program funds in 2020 with $2.3 million it used for payroll. Funds from the program that are used on payroll don't have to be paid back to the federal government.
The Solid Waste Advisory Board was formed this year to oversee Fort Wayne's Solid Waste Department, which oversees Red River. The city entered a seven-year contract with Red River in 2017, which will be up for negotiation in 2024.