Court documents related to Pride Group Holdings’ filing for creditor protection paint a picture of a once-thriving transport and real estate conglomerate, caught out by rapidly deteriorating trucking industry conditions.

Included in the filing for creditor protection are 16 transport companies, 45 real estate holding companies, and 10 other holding companies founded and controlled by Sulakhan “Sam” Johal.

Collectively, the companies owe creditors about $1.6 billion Canadian and US$637 million. Last week, Mitsubishi HC Capital America filed suit against Johal, and brother Jasvir Johal, accusing them of defaulting on credit lines taken out to build inventories for Pride Truck Sales and Tpine Leasing. The lender is seeking damages of about US$100 million, claiming the Johals personally guaranteed the loans and then defaulted on payments.

Thursday night, Pride issued a press release indicating it had been granted CCAA creditor protection in order to buy time to get its affairs in order and restructure the business. The documents related to that CCAA filing detail what went wrong.

Creditors come calling

Sulakhan Johal’s affidavit indicates the Pride Group operates from more than 50 leased and owned facilities in the U.S. and Canada, controlling more than 20,000 trucks, including those on the companies’ dealer lots.

More than 20 lenders have claims to about $1.6 billion in debt from the Mississauga-based company. These include major financial institutions such as Mitsubishi Capital, as well as truck OEMs including Daimler Truck Financial Canada ($193 million), Daimler U.S. (US$69.7 million), Paccar Financial ($46.9 million), and Volvo Financial Services Canada ($9.8 million).

Pride Group’s business focused on offering a “one-stop solution” including truck sales and leasing, repairs and maintenance for entrepreneurial owner-operators, primarily from the South Asian community.

In his affidavit, Johal indicated this owner-operator truck driver demographic is in peril.

“The North American trucking and logistics industry is facing a prolonged downturn, the effects of which are exacerbated by the trucking and logistics boon that preceded the downturn, which can be traced to the Covid-19 pandemic and major geopolitical events,” court filings say.

“Spot freight prices, diesel prices and interest rate trends were all initially favorable for the trucking industry following the onset of the Covid-19 pandemic. They have all deteriorated significantly since that time. The bottom-line result is made significantly worse by virtue of the increased trucking and logistics supply that was brought to market during the upturn, which is currently sitting as unused excess capacity in the market.

“The effects of all of the foregoing have been disproportionately borne by smaller trucking and logistics companies and owner-operators in particular. Of the latter group, those persons that entered the market during the initial demand ramp-up following the Covid-19 pandemic’s onset have been affected most of all as they bought or leased trucks when valuations were at or close to peak prices and financed their acquisitions operations when interest rates were low, both of which have since reversed dramatically.”

Delinquencies and non-payments followed, Johal explained, impacting Pride’s financial position. Before long, Pride itself was unable to pay its own debts.

Affidavit tells story of fast-changing fortunes

In his affidavit, Sam Johal blamed rising interest rates and diesel costs, sharply dropping spot freight rates, increasing customer delinquencies and defaults on leases and contracts on the sudden turn in fortune for the company.

Pride Group itself has received more than 40 default notices since December 2023. Lenders have indicated they will no longer fund new lease assets.

Court documents say some 30,000 truck drivers interface with Pride Group annually, as employees, customers, lessors or contractors. It has roughly 1,000 employees and independent contractors in the U.S., Canada and India, most of them in Canada.

“Until very recently the Pride Group was highly profitable,” Johal said in his affidavit. “The onset of the Covid-19 pandemic in 2020 disrupted the Pride Group’s historical trajectory, initially causing unprecedented growth but then ultimately leading to the Pride Group’s inability to meet its financial obligations. This situation is not unique to the Pride Group and has affected the trucking and logistics industry as a whole.”

Pride Group found its fate directly tied to that of the struggling owner-operator community. “Any delinquency by a single owner-operator has ripple effects across multiple business lines,” said Johal.

Pride made attempts to shore up its financing and wait out the downturn, said Johal in his affidavit. It reduced its workforce and wound down less profitable business lines. It was also forced to suspend payments to lenders in order to remain actively in business.

“The downturn has continued and the Pride Group can no longer sustain the status quo,” said Johal.

Meanwhile, the company determined some trucks were financed by multiple lenders, making competing claims against the same collateral, “unbeknownst to both the Pride Group and the affected lenders.”

Currently, Pride Group has some 18,500 trucks leased to customers in Canada and the U.S., with more than 4,500 trucks inventoried. The company has shut down its EV and green energy division, founded in 2021, “selling and returning equipment when possible.”

Pride’s main OEM supplier was Daimler, but it also sourced trucks from Volvo, Navistar and Paccar (Kenworth and Peterbilt).

Pride Group has some 405 independent contractors, mostly based in Ontario. “While these individuals are hired as independent contractors, they rely solely on the Pride Group for their income,” Johal said. “The continuation of the independent contractors’ relationship with the Pride Group is critical to its ongoing operations.”

Johal asked the court to allow it to continue paying its independent contractors and employees. Johal, and his brother Jasvir, have personally guaranteed more than $200 million in loans. They say they also injected about $18.5 million into the business from funds borrowed from Bank of Nova Scotia personal credit lines.

The Bank of Nova Scotia has declared a default and has threatened to initiate proceedings against Sam Johal, who secured a mortgage against a home he’s building.

Can Pride survive?

Can the company survive after a restructuring under CCAA protection? Johal hopes so. “A liquidation will mean significant losses of jobs,” the company contends. “A liquidation would also mean thousands of trucks being sold on the market at once, which would decimate the value of trucks across the North American market. This would have far-reaching effects.”

The company also said if Pride were to enter bankruptcy, “The fallout from an unorganized demise of the Pride Group on the Canadian and U.S. owner-operator trucking communities in particular will be catastrophic, as will the spiral effects on all of the businesses that they support in their local communities. The livelihoods of many thousands of families are at stake.”

TruckNews.com has requested an interview with Pride Group leaders. Mitsubishi Capital refused comment on its lawsuit against the company.