FT. LAUDERDALE, Fla. — Last month a group of six former rental company owners who sold to NationsRent retained an attorney to help present an alternative to the restructuring plan the Fort Lauderdale, Fla.-based consolidator will present to the bankruptcy court. The group has put together a plan that would include placing many of the former owners in executive positions because, they say, their history and knowledge of the rental business makes them more qualified to run the business than executives from outside the industry.
The group is also concerned about the compensation they are receiving from NationsRent.
“Many of our group and many other owners are owed either notes or stock,” said Jim Ziegler, former owner of Rental City, Boulder, Colo. “For those of us with notes, we are concerned about being paid more than the normal dollars that are typically paid out in bankruptcy situations if the company goes into Chapter 7. If the company is successfully reorganized, those with stock would like to see that stock valued more highly in the future.”
The group, which includes former owners John Greene of California, Bud Sampson in Phoenix, Rafael Garzarelli in Salt Lake City, and Charlie Davis of Alabama, also wants at least one of the former owners to be represented on the unsecured creditors' committee in order to have more representation in the reorganization process.
The formers owners are also seeking for the court to rescind the non-compete agreements they signed with NationsRent. “These former owners worked very hard to make their businesses successful and many received unsecured promissory notes and stock options with little hard cash,” Boulder, Colo.-based attorney Giovanni Ruscitti told RER. “It's quite ironic that NationsRent is still trying to enforce non-compete agreements after stripping them of their equity, defaulting on lease agreements and paying them little in return. Our goal is to try to get these individuals some or all of their money and to at least cancel the non-compete agreements so they can work.”
Ruscitti pointed out that the former owners, by banding together, have been able to reduce the legal fees they would otherwise have to pay by filing separate lawsuits.
NationsRent obtained final court approval of its $55 million debtor-in-possession financing led by Fleet National Bank. The company has yet to borrow under the DIP financing and currently has about $40 million of cash.
The company, which filed for Chapter 11 bankruptcy protection in December, also announced the appointment of Philip Petrocelli as interim president and CEO. Petrocelli served as executive vice president of NationsRent since its inception in 1998. Petrocelli will direct the company through the reorganization process until a permanent president and CEO is found. NationsRent has retained, subject to court approval, the executive search firm of Korn/Ferry International to aid in this search.
NationsRent also appointed Thomas Bruinooge non-executive chairman of the board. Bruinooge has served as an outside director of NationsRent since 1998. Bruinooge will work with the board, senior management and financial advisors to maintain relationships with customers and vendors and help develop a reorganization plan to help the company emerge successfully from Chapter 11.
According to a report in the Miami Herald, the former owners object to the promotion of Petrocelli to interim CEO and president. Petrocelli replaced James Kirk, a founder of the company, who resigned in February.
According to Ruscitti, his clients are mainly concerned with Petrocelli's taking NationsRent's helm. “It's due in part to [Petrocelli's] mismanagement and [the performance of] others like him that this company is in the financial condition it's in,” said Ruscitti, who expects to file an objection to the promotions with the Fort Lauderdale bankruptcy court.
Former owner Ziegler, who sold three stores in Colorado to NationsRent in December 1999, said NationsRent still owes him $2.5 million from that deal and another $200,000 in compensation.
Bryan Rich, another of the former owners, said that NationsRent's current financial woes were caused by high-level corporate mismanagement. NationsRent officials declined to comment on the developments.
NationsRent is No. 4 on the RER 100.
