RailWorks Corp. has emerged from bankruptcy after a year-long reorganization that included shutting down its Baltimore headquarters and taking the company private.
The rail services company, which employs about 3,600 in 60 offices throughout North America, has organized its 30 remaining subsidiaries into two distinct business groups and moved much of its administrative offices to White Plains, N.Y.
RailWorks, a worldwide provider of materials, construction and maintenance services to the rail and rail-transit industries, once employed about 30 executives and support staff at its Baltimore headquarters.
"We've got a fresh start, and we've got strong employees," said Jim Kimsey, who took over as president and chief operating officer in May as part of a management shakeout. Ab Rees, RailWorks' chairman and chief executive, was unavailable for comment yesterday.
The company's reorganization plan included financing from two private investment funds: Matlin Patterson Global Opportunities Partners and Stonehill Capital Management LLC. Matlin received an 82 percent stake in the company. The rest is owned by Stonehill and certain employees.
RailWorks received $175 million in term and revolving credit from stakeholders during its restructuring and has drawn about half that amount, leaving it well-positioned to fund future operations, Kimsey said. The company has a backlog of about $500 million worth of work and expects to generate revenue of $550 million to $600 million annually.
But the restructuring didn't come without pain. Shareholders filed a class action lawsuit last year accusing the company of not disclosing required financial information. The lawsuit is still pending.
Bank of America, stockholders and other creditors lost about $200 million in the bankruptcy, Kimsey said. However, the company's key bankers participated in the restructuring and provided new financing.
RailWorks' turbulent history as a publicly traded company can be traced in part to its unusual organizational structure. The company was formed in 1998 when a collection of old-line companies serving various niches in the rail business combined to take advantage of economies of scale and brand recognition. In financial circles, it's what's known as a "roll-up."
To be successful, roll-ups must rapidly acquire new companies, pump up revenue and drive up the stock price in order to fund more acquisitions. At one point, RailWorks was buying a company a month, Kimsey said. The company eventually ran into cash-flow problems, forcing it to default on its huge debt.
"The concentration was on the market play and not on the business itself," Kimsey said. "We [new management and owners] are focused on the business and the market at hand."
The company is benefiting from a resurgence in transit spending in major cities. Spending among Class 1 freight railroads also is rebounding.
Kimsey said the company wanted to keep its headquarters in Baltimore, but it needed to shed certain leases and consolidate real estate as part of the restructuring.