FORT WAYNE, Ind. (WANE) — A city of Fort Wayne spokesperson said Monday the city was still studying the bankruptcy filing of its trash and recycling contractor, Red River Waste Solutions.
Texas-based Red River filed for Chapter 11 bankruptcy on Thursday. In the filing, the family-owned business, which services 310,000 households across 5 states including Fort Wayne, blamed the COVID-19 pandemic, a credit agreement and “operational challenges” for its financial struggles.
Red River said in the filing it hoped to “reorganize its business” through bankruptcy.
What will that mean for Fort Wayne residents, though?
John Perlich, a spokesman for Mayor Tom Henry’s office, told WANE 15 there will be “an update” at Tuesday’s City Council meeting. He didn’t specify what exactly the update will be, but added: “details are being worked out now.”
Perlich said in the meantime, garbage and recycling materials continue to be collected.
“This was a shock,” said Councilman Geoff Paddock (5th District) of Red River’s bankruptcy filing. “Obviously it’s a disappointment to see their business failing… but, I will say one thing in the short term – in the last three days since the announcement was made, Red River has been out and they have been picking up trash in the district neighborhoods that I represent.”
In 2017, Red River secured a seven-year collection and hauling contract with the city of Fort Wayne. The service has been problematic for many residents from the outset, with regular missed collections that led to fines levied against the contractor.
Paddock said he wasn’t sure if the company filing for bankruptcy would void the city’s contract with Red River. That would have to be looked into by the city’s legal department, he said.
Even considering that extensive history of complaints from customers, Paddock said hiring a new company “wouldn’t necessarily mean the problem will go away.”
Court documents filed by the company said its revenue dropped by $1 million between March 2020 and February 2021. The three primary factors that have transformed Red River’s “relatively stable operation:” the COVID-19 pandemic, a credit agreement executed on or around April 1, 2020, and operational challenges.
COVID-19 and Operational Challenges
According to the filing, since the pandemic has confined people to their homes, their levels of residential waste have “increased dramatically.”
“This increase in waste volumes required the Debtor to respond by hiring more workers to collect that waste,” said court documents. “This was an added challenge because many workers, including Red River’s employees, were more inclined to stay at home in response to the pandemic.”
The company said in addition to struggling to find workers to help pick up the extra trash, the increase in waste volumes has also taken a toll on its vehicles and equipment. These service and equipment problems resulted in “substantial fines.”
In total, responding to issues created by the pandemic has cost Red River approximately $1.3 million, according to the filing.
April 2020 Refinancing
Court documents say in April 2020, Red River entered into a $35 million loan. Due to the significant debt service required under the loan obligation, “the company was forced to significantly reduce or eliminated the funds it otherwise budgets for the maintenance and repairs required to preserve its vehicle fleet and other equipment.”
Since April 2020, the company has built up a deferred maintenance obligation of about $2.6 million, according to the filing. Approximately $1 million of that relates to repairs necessary to comply with safety inspection requirements.
To reorganize its business, the filing says Red River believes it has three reasonable options: a stand-alone restructuring of its business, a reorganization that includes engaging third-party exit financing or selling its business in two parts based on prepetition marketing.
WANE 15 has efforted multiple attempts to obtain a statement from Red River but has not had any luck.
Tuesday’s City Council meeting starts at 5:30 p.m.