Bouchard Transportation Barges and Tugs at Auction: Thoughts on Values and Prices

After several years of legal wrangling in bankruptcy court in Houston (Case No. 20-34682 (DRJ)), earlier this month (July 2021) most of the marine assets of Bouchard Transportation Co., Inc (“Bouchard”) were sold at auction with the Asset Purchase Agreements (APA) to be finalized imminently and the bankruptcy judge formally approving the transfer of ownership.

Image Copyright: Karatzas Images 2021

By way of quick introduction, Bouchard was established in 1918 and had been active in Jones Act marine transport of liquid chemical and energy products. It was amongst the oldest and largest shipping companies in the US, a family business nonetheless, bearing the last name of its founder and managed by family members since inception, and an estimated Enterprise Value (EV) at its peak in excess of $1.2 billion. In 2019, the Company owned and operated fifty (50) ocean tank barges (ranging from 35,000 to 260,000 bbl in capacity and built 1979 – 2019) and tug vessels (ranging from 3,000 – 10,000 hp and built 1970 – 2019). In 2017, one of the Company’s barges in Corpus Christi, TX, exploded resulting in the death of two crew members, with the NTSB Report citing as Probable Cause the “lack of effective maintenance and safety management of the barge”. Ever since the fatal accident, the Company struggled to retain its chartering book, which led to idling vessels and eventually to a cash death spiral. In 2020, the Company (actually each Debtor company) filed for voluntary petition for relief under chapter 11 of the Bankruptcy Code. It was originally envisioned for the Company to re-organize itself, under the leadership of its CEO Mr Morton S. Bouchard, and the approval of the court. Debtor in Possession (DIP) financing was obtained in two tranches, and until early in 2021, the Company seemed poised to a plausible turnaround scenario.

In May 2021, Mr Bouchard was removed as CEO of the Company, and soon thereafter, twenty (29) of the Company’s marine assets were placed on the auction blog. In July 2021, Hartree Partners LP were selected as the stalking horse for the bidding process with $110 mil reserve price. Later in the month, one of the DIP financiers offered marginally higher than the stalking horse bid price and were awarded the auction sale at $115 mil.

The auction process and sale price achieved could make themselves subject to commentary, given that some parties were left scratching their heads. To be sure, 29 Jones Act marine assets very rarely hit the sales bloc, and typically, if they do so, it’s via the venue of corporate finance, M&A, etc, and not via the auction blog. Given that certain assets of the Company were making up close to 30% of certain segments of the Jones Act market, many competitors kept a very close eye on the transaction even if they had minimal interest in acquiring the assets per se. And, in an overall weak Jones Act market (driven down by the COVID19 pandemic and minimal shale oil drilling activity), many players hoped to buy precious Jones Act asset, twice distressed (an auction sale in a possibly artificially weak market). In short, this has been a very high profile case, and quite frankly, the