STG Logistics, America's 4th largest asset-based intermodal marketing company (IMC), announced today it initiated Chapter 11 bankruptcy proceedings in New Jersey. While that sounds like concerning news for intermodal service, the Ohio-based company says it will continue operating "in the ordinary course of business" throughout the process and will emerge stronger on the other side. Let's take a deeper look at what today's announcement means.
The Columbus, Ohio-based company says intermodal services it offers will not be affected by the filing - an important clarification for intermodal capacity and general operations. That's because STG owns approximately 15,000 53' containers as of 2023 (behind only JB Hunt, Hub Group and Schneider for private ownership). Additionally, the Journal of Commerce reports it owns 32 warehouses and offers agency based ocean drayage as well as transloading operations at U.S. ports. Beyond that, it partners with CSX to offer RailPlus domestic intermodal service.
However, the filing marks one of the more high-profile businesses affected by a persistently slow freight market that has failed to normalize in more than three years. In fact, JOC notes the bankruptcy was "anticipated" because of both the freight recession and multiple lawsuits it's facing. While STG is not ceasing operations, the move suggests at least some fragility and likely sparks concern among employees and customers about its long-term prospects.
STG Logistics Chapter 11 Process
The chapter 11 filing came, as STG said, to allow it to enter into a Restructuring Support Agreement to reduce debt obligations and infuse $150 million in capital to improve its long-term outlook. The company says it's filed several "first day" motions, that will allow it to continue:
Those motions are considered "typical" according to the company, but they must first be approved by the court. STG says it will use the $150 million on top of cash on hand to support core operations while the chapter 11 process is underway. JOC's Ari Ashe notes on LinkedIn that the outcome of the cash infusion will be a change in ownership once STG emerges from bankruptcy (expected in five months), with Antares, Fortress Investment Group and Invesco taking over.
While in this case, nothing is expected to change regarding service and no assets are frozen (or being liquidated), it serves as a reminder that non-asset logistics companies with access to a wide variety of both railroad-owned and private containers (and countless dray carriers) offer an appealing alternative. If assets of a major private owner were to freeze or undergo a sale, shippers relying on the asset-based carrier tied to them would face a scramble for other options.
But non-asset providers would simply pivot to the tens of thousands of other containers (both private and rail-owned) and additional dray providers they have ongoing access to. In other words, while such a scenario would be require some maneuvering for a non-asset IMC, the shipper customer would feel no impact as the provider would handle everything behind the scenes. All freight could continue moving uninterrupted with no noticeable changes for the beneficial cargo owner (BCO).
At InTek Intermodal Logistics, our non-asset approach gives us access to capacity in a wide variety of ways, and we strive to offer a truck-like, one-stop shop for our customers - making intermodal simple. If you're looking to explore options with us, simply request a quote, and we'll reach out to discuss tailored solutions for your business. For more information about InTek, or logistics and supply chain issues in general, check out our Freight Guides.