Covenant Logistics Sells Its Transportation Factoring Assets For $132.2 Million

  • Wednesday, July 8, 2020

Covenant Logistics Group, Inc. on Wednesday announced the sale of the transportation factoring assets of its Transport Financial Solutions segment to Triumph Business Capital for approximately $132.2 million, including contingent consideration of approximately $9.9 million. Triumph Business Capital is an indirect wholly owned subsidiary of Triumph Bancorp, Inc. 

Chairman and Chief Executive Officer David R.

Parker commented: “TFS has grown significantly since inception in late 2011 and delivered consistently strong margins and returns. With a critical mass of over $100 million of capital deployed and strong growth opportunities, it was time to transition the business to an owner with a core lending focus and deep knowledge of the transportation industry.

"We are confident Triumph is the right partner for TFS’ clients going forward. The ability to pay down over $120 million of debt in the near term is consistent with our goals of significantly reducing our leverage and concentrating our business model on services and sectors where we can add considerable value to our partner-customers in the U.S. logistics industry.”

The transaction was structured as a sale of TFS’ factoring assets, consisting primarily of $103.3 million of net accounts receivable and related transportation factoring assets. In exchange, Covenant received cash proceeds, net of transaction expenses, totaling approximately $107.5 million, plus Triumph common stock valued at approximately $13.9 million, and the opportunity to earn contingent cash consideration (net of allocations to former TFS management) of up to approximately $9.0 million after the 12-month period ending July 31, 2021. The parties also entered into an ongoing referral arrangement.

The TFS transaction is expected to generate a third quarter pretax gain ranging from $34 million to $38 million. The third quarter gain from the sale of TFS is expected to modestly exceed the net amount of multiple second quarter gains, impairments, and expenses relating primarily to the sale or exit of certain real estate, downsizing unprofitable operations, reallocating fleet assets toward contract logistics operations, and other actions consistent with the strategic plan.

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