After 18 months in bankruptcy over $620 million in debt, Don F. Ahern is breathing a heavy sigh of relief. Ahern, who is president of the country's largest private construction-equipment rental company, received approval on June 5 for a Chapter 11 bankruptcy exit plan in federal court in Reno, Nev. As part of the deal, Ahern will remain at the helm of 60-year-old Ahern Rentals Inc.

The Las Vegas-based company's plan provides 100% claim repayment with 16% monthly interest to term lenders for nearly $18 million. It also allows Ahern to avert a takeover of the family-owned business started by his father in 1953.

AHERN

"Our operating performance continues to improve considerably due to, among other things, significant improvement in the global economy and the resulting recovery in the equipment rental market," said Ahern, the company's president and CEO, in a statement. "Ahern Rentals has made very significant progress during this process."

During the bankruptcy struggle, the maverick equipment magnate successfully averted a creditor takeover bid led by billionaire investor Tom Gores, whose Platinum Equity LLC owns rental outfits Maxim Crane Works and NESCO.

Guarding the Castle

Ahern's initial bankruptcy plan, filed in December 2011, proposed repaying the loans at less than face value while keeping ownership intact (ENR 1/9/12 p. 10). The plan ran contrary to basic bankruptcy law: If creditors aren't repaid in full, owners usually lose part or all of their positions. Platinum Equity, which has acquired over 145 companies since 1995, filed its own plan to snatch control of the company as repayment of the debt.

Ahern balked at that idea, however, and acquired new bridge financing through Bank of America so he could file a revised plan that paid everyone in full. The move allowed Ahern to retain ownership, post-bankruptcy, with a rental fleet of 37,053 pieces of equipment across 75 branches in 22 states. Ahern was the country's sixth-largest rental firm in 2012, according to a top-100 ranking by trade publication Rental Equipment Register.

Indeed, before interest expense, income taxes, depreciation and amortization, Ahern increased 2012 earnings by 151.9%, to $116.9 million, after bottoming out a year and a half earlier. Last year, total fleet-dollar utilization hit 45%—a 14.7% increase since 2009, despite $17 million in capital equipment expenditures in 2012. The dramatic turnaround can be attributed partly to cost-cutting measures that have included the sale of more than 3,000 pieces of machinery, which resulted in $53.9 million in added income between 2010 and 2012.

Ahern also trimmed 125 positions, saving $6.5 million in salary and wages. He also renegotiated vendor pricing while shifting the company's business focus away from Las Vegas, which at one time made up 25% of the company's total revenue. Ahern Rentals opened 24 new branches between 2010 and 2011 throughout the South and the East Coast in order to redeploy 4,500 rental pieces left over from the completion of the CityCenter project in Las Vegas (ENR 11/4/09 p. 50), say court documents.

Ahern's total Las Vegas revenue has dipped by 11% during the past three years as the company has focused on more economically robust regions in the industrial, manufacturing and utility sectors. Ahern Rentals has emerged from bankruptcy with a $323-million credit line. The company plans to reduce the average age of its fleet from 71.1 months in 2012 to 52.9 months by December 2017.

The bankruptcy strategy has paid off. "I'm not surprised by the turnaround. Ahern expanded during the recession when everyone was doing the opposite," says Michael Roth, RER editor-in-chief. "The economy has since picked up, and they got in at the ground floor."