NEW YORK (Reuters) – EZ Lube filed for bankruptcy protection on Tuesday, saying it had been hurt by the economic downturn, and put itself up for sale.
The company, which runs about 82 vehicle oil change locations, mostly in California and Arizona, filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court for the District of Delaware on Tuesday, along with its Xpress Lube-Tech affiliate.
It said it reached an agreement to sell substantially all of its assets to EZ Lube Acquisition Co, an affiliate of its existing lenders Goldman Sachs Group Inc (GS.N: Quote, Profile, Research, Stock Buzz) and funds managed by GSO Capital Partners LP. EZ Lube is seeking court approval to name that group as the “stalking horse,” or lead bidder, at a bankruptcy auction for its assets in March.
EZ Lube said in court papers that it incurred a net loss of about $8.1 million for the first nine months of 2008, on top of a $44 million loss in 2007. The company’s sales had declined about 9 percent from a year earlier in the 10 months through October.
“Decreased consumer confidence and worsening financial conditions have caused many customers to drive more miles between services, forgoing oil changes and other services,” EZ Lube’s chief restructuring officer Stephen Coffey said in a court affidavit.
“Moreover, the high gas prices experienced over much of 2008 resulted in customers driving fewer miles on average, and thus oil changes and other services have been needed less frequently, leading to lower sales so far this year,” he continued.
The company also said it had been hurt by negative publicity related to its automotive repairs business. The company had been accused of charging for parts and services that were not needed, and making false and misleading statements to customers, resulting in a $5 million settlement with the California Department of Consumer Affairs/Bureau of Automotive Repair last year.
EZ Lube listed assets of about $113 million and liabilities of about $114.4 million, according to court papers.
Goldman Sachs has also agreed to provide the company’s debtor-in-possession financing, designed to allow it to continue operating between the bankruptcy filing and the sale.
The company has nearly 1,000 employees, and services over a million cars per year, according to court papers.
EZ Lube said in court papers that it is seeking court approval to continue honoring warranties for the car batteries it sells, and customer gift card programs.
(Reporting by Emily Chasan, editing by Gerald E. McCormick)