Ahern Rentals misses $10.9 million interest payment

By Steve Green

Wednesday, Feb. 16, 2011 | 7:49 a.m.

Struggling with debts and liabilities totaling more than $648 million, Las Vegas-based construction industry supplier Ahern Rentals Inc. said it did not make a $10.9 million interest payment that was due Tuesday.

The interest was due on Ahern's 9.25 percent Second Priority Senior Secured Notes due 2013. Some $238 million was owed on those notes at the end of the third quarter.

Ahern said it entered into a forbearance agreement with a majority of the revolving lenders under its credit agreement and that, subject to conditions, the lenders will take no action as a result of any default under the credit agreement that arises from non-payment of interest on the notes or specified other events that could result in a default through Aug. 21.

The decision to not make the interest payment on the notes was done with the support of the holders of the term loan under Ahern’s credit agreement as well as the holders of a majority of the outstanding principal of the notes, the company said.

"Our decision today is an important first step in extending the maturity of our credit agreement. We are engaged in discussions with the lenders under our credit agreement and the holders of a majority of the outstanding principal of our notes aimed at addressing the maturity of our credit agreement, and our decision to not make the payment was done with their support. The decision was part of our strategy to extend the maturity date of the revolving portion of our credit agreement, and with $33.5 million of availability on our revolver, we have sufficient liquidity to meet our commitments to our employees, customers and vendors," CEO Don Ahern said in a statement. "After a few very difficult years due to the recession in the United States, we have been experiencing a significant improvement in all areas of our business, particularly during the past six months, with a significant increase in our utilization levels and improving pricing. Ahern provides a valuable service for its customers and the discussions with our lenders and noteholders do not affect our commitment to continuing to offer customers highly reliable and quality equipment and service. It is business as usual and we anticipate no impact on our employees, customers and vendors."

With the recession slashing demand for construction equipment that Ahern rents, the company lost $19.6 million on revenue of about $80 million in the quarter ended Sept. 30.

Ahern has 71 equipment rental branches around the country.