New York City School-Bus Operator Files for Bankruptcy

School-bus operator USA United Fleet Inc.—one of the biggest providers of transportation for New York City’s public-school children—turned to bankruptcy court for a little breathing room after hitting a series of financial potholes.

The Staten Island company, which runs a fleet of more than 400 sunflower yellow school buses, turns a profit off the six New York City Department of Education contracts it has secured, according to company attorney Todd Duffy. But executives at the family-owned company now have to decide whether they’ll restructure the company’s finances throughout the bankruptcy case or simply sell the business to escape their mounting money problems.

The business’s financial hardship is well-explained in its bankruptcy-court filings. First off, company officials are in the middle of suing an outside payroll firm over millions of dollars it allegedly embezzled instead of putting toward the appropriate taxing authorities, according to court documents. Then, the union that protects its bus drivers demanded a $1.2 million security deposit—a request that its collective-bargaining agreement doesn’t even allow for, the company said.

On top of that, its most senior lender, Comerica Bank, charged it more than $1 million for adjustments it made to the company’s original loan.

“Yet, even the most solvent of businesses has its breaking point,” the company said in documents filed in U.S. Bankruptcy Court in Brooklyn. “Here, with the loss of available cash in the amount of almost $10,000,000, it is only a surprise that a petition was not filed sooner.”

Comerica later sued USA United Fleet and its affiliates to collect money related to the $10.9 million it says it’s owed, an amount that the company disputes. Bankruptcy cases automatically halt previously filed lawsuits and prevent new ones.

USA United Fleet immediately filed a series of requests to keep its operations running as smoothly as possible. Duffy said that the company’s biggest concern is being able to pay its roughly 1,800 employees.

“There’s a whole litany of people who work for the company, and my clients are very concerned about them getting paid,” said Duffy, attributing the corporate ethos up to the company’s family-owned status.

USA United Fleet executives also placed seven affiliates into Chapter 11 protection last week. In its petition, the company estimated that both its assets and debts measure somewhere between $10 million and $50 million.

Most of the company’s school buses are parked and serviced at its main depot located at the southwestern tip of Brooklyn.