After experiencing record sales growth during the COVID-19 pandemic, digital freight brokerage Surge Transportation says it was forced to file for bankruptcy protection as it was unprepared for the abrupt decline in product demand and soaring shipping costs that rocked the transportation industry in April 2022.
Surge Transportation, headquartered in Jacksonville, Florida, filed its bankruptcy petition, which seeks to reorganize the business, in the U.S. Bankruptcy Court for the Middle District of Florida on Monday.
Prior to the rise in inflation, the war in Ukraine and the easing of COVID-19 restrictions last spring, Surge had experienced record year-over-year sales growth of 260% in 2021 and 240% in 2020, court filings state.
According to the freight brokerage’s financial statements, which are based on a trailing 12-month basis as of March for the past two years, Surge posted gross revenues of around $135 million in 2023, a substantial drop of approximately $65 million from $200 million in 2022.
FreightWaves broke the story about Surge Transportation filing for Chapter 11 early Tuesday. The company plans to continue operating as it seeks to reorganize.
“Surge, like many others in the industry, did not anticipate the rapid change in the demand for shipping services and failed to reduce overhead in a timely manner,” according to court documents.
As a result of the company’s failure to pivot to the changing market conditions, Surge stated that “it became increasingly delinquent in the payment of carrier claims” and owes about $12 million to 5,000 trucking companies.
As of publication on Tuesday, Omar Singh, founder and president of Surge Transportation, had not responded to FreightWaves’ request seeking comment.
In its petition, Surge, which was founded in 2016, listed both its assets and liabilities as being between $10 million and $50 million. The freight brokerage stated that it has up to 5,000 creditors and maintained that funds will be available for distribution to unsecured creditors.
Sixteen of the 20 largest creditors are factoring companies, including RTS Financial Services of Dallas, owed nearly $2.5 million; Triumph Financial Services, also of Dallas, owed more than $1.4 million; and Apex Capital Corp. of Fort Worth, Texas, owed nearly $660,000.
At the time of its bankruptcy filing, Surge owes wages of about $155,000 to its 43 full-time and part-time employees, according to court records. At its peak, the freight brokerage had more than 100 employees.
The company’s overseas operations, which are managed through service agreements with Valoroo and Hubtex to provide staffing for Surge’s billing, account reconciliation and other back-office services, are owed $173,000 and $96,500, respectively.
According to court filings, Surge recently amended its factoring agreement with Triumph so that “advances on post-petition receivables factored through Triumph and non-factored receivables will be directed to TriumphPay” in an effort to get carriers paid faster using QuickPay. This agreement is one of several emergency motions expected to be filed by Surge’s bankruptcy attorney, Bradley R. Markey, over the next two weeks.
A preliminary hearing is scheduled for Thursday in Jacksonville.
Read more articles here:
The post Surge Transportation blames bankruptcy filing on sales drop after e-commerce boom appeared first on FreightWaves.