Case Study: Restructuring of Pfeiffer Reisen under Insolvency Protection

Pfeiffer Reisen GmbH & Co. KG in Bad Zwischenahn is a traditional bus company with an emphasis on local and long-distance bus routes as well as local bus rental and tourism. Strong growth and diversification in new business sectors together with other factors have led to insolvency without any premonitory symptoms of turnover or profit problems.

The company was established back in 1966 in Bad Zwischen- ahn by the father of the current owner and managing director Stefan Pfeiffer as a taxi business. Siegfried Pfeiffer started out at that time with a single taxi. But before long the business extended to public transport using buses, school buses, and for handicapped passengers (on bus routes). After giving up the taxi business in the 1970s, the public transport business was extended gradually by renting out buses together with their drivers to clubs, societies and school classes and also by bus excursions (private hire bus and tourism).

In 2009 Stefan Pfeiffer took over from his father the man- agement of what had now become Pfeiffer Reisen GmbH & Co. KG. When in 2013 the legal conditions were created for private sector long-distance bus services to enter into competition with Deutsche Bahn [German Railways], Stefan Pfeiffer extended his business by operating long-distance bus routes for the current market leader in this sector. Furthermore in 2014 he established his own travel agency, offering a local tourism service for bus excursions and car hire. Driven above all by the extension of the core business of local public transport and also the new business of long-distance bus travel, the company grew annually by 14% in the three- year period before 2015, to reach a turnover of € 6 million, a fleet of 79 motor vehicles and a staff of 140.

For the first time in the company’s history, in 2015, a (small) loss was made parallel to a continually shrinking liquidity. There were many reasons for this: the requirement for financ- ing and refinancing required for the rapid growth used up considerable liquidity. Furthermore, the growth in personnel costs resulting from the [German] minimum wage legislation could not be passed on to customers in the short term. Additionally, there were considerable instances of motor damage and bad debts on receivables. Moreover, unexpectedly, the travel agency did not cover its own costs. In view of credit lines which had already been used up and significant personal guarantees given by Stefan Pfeiffer to financial partners and suppliers, the decision was made in January 2015 for restructuring the company via an insolvency plan process in self-administration. 

Support throughout the insolvency plan process 

With an application for “debtor in possession” Tim Langstädtler from the company Buchalik Brömmekamp, as in- solvency director, became a member of the senior manage- ment of Pfeiffer Reisen, providing support (with his specific experience of trouble-free ongoing operation in insolvency situations) to Pfeiffer Reisen in the insolvency process. Most importantly this included the regular and intensive support and information provided to the creditors’ committee and the communication with all affected stakeholders concerning progress made in the process. The insolvency plan process had been largely unknown among the customers, suppliers and minor financial partners. The company workers were informed of the process and their situation regarding em- ployment laws in a number of staff meetings. Also applied were methods proven in practice and instruments of optimum control of the process – all without delay: 

  • Short-term rolling liquidity planning
  • Reporting at short intervals using important key indicators for short-term company management
  • Adapting operating processes to insolvency-specific requirements, e. g. in accounting and purchasing 

Providing support for the process had to be negotiated with financial partners, major customers and key suppliers. First of all, this concerned the ongoing delivery of fuel, relinquish- ing calling in the company owner’s personal guarantees and maintaining existing credit lines. Moreover, it had to be avoided that the sole customer in the long-distance bus business withdraw from the contract; a contract concerning factoring of receivables had to be terminated.

Operational reconstruction 

Parallel to these short-term measures a comprehensive restructuring concept was developed as part of a provisional process and its implementation commenced. Starting off with a comprehensive analysis of the company’s situation and the market as well as the competitive environment and the causes of the crisis, both operational restructuring and individual measures were devised and a guiding principle for the future of Pfeiffer Reisen was developed.  

This guiding principle comprises a strategic focusing on the core business of local bus routes and the growth area of a long-distance bus service, giving up the tourism busi- ness, and serving exclusively, as opportunities arise, the private bus hire market as a side line contributing to profit margins without requiring its own personnel and other resources.

  • Sales emphasis will be on the regional expansion and widening of the customer bases in local bus routes, an increase in turnover and cost optimisation in long- distance bus services, profitability improvement through price adjustments and development of the weekend business in the private bus hire market and also in providing support for the introduction of key account management.
  • In the field of operations, a number of lesser individual measures will yield an increase in availability and hence the utilisation of the buses, the flexible deployment of the salaried drivers in terms of location and time, the optimisation of the structure of the bus fleet including a reduction in the average age of the buses and also the optimisation of workshop capacity.
  • The commercial capacity and competence of the company has not adequately kept pace in the last few years with the high growth rates and the new business activities. Professional commercial structures are also required for planned strategic focusing. A newly recruited commercial manager will develop among other things a controlling system including cost centre accounting and accounting based on contributions to margin and also put in place systematic pricing. Future payroll and financial accounting will be done in-house.
  • Changes in the area of organisation and personnel will in particular be geared to the organisational conditions required for the sustainable implementation of the new com- pany structure and aims. Important individual measures in this case will be setting up a second level of management and changes in responsibilities and competencies required for the new structure.

Financial restructuring 

With insolvency payments made by the Bundesagentur für Arbeit [(German) Federal Employment Agency] and the waiver of social security contributions and sales tax it was possible to generate sufficient liquidity within the scope of the current provisional process in order to maintain business operations. The waiver of payables which was agreed by the individual creditor groups represented by the creditors’ committee, led to a tax-free restructuring profit in the amount of approx- imately € 1.4 million, which allowed the company’s equity capital structure to be sustainably strengthened. With the planned payment quota, the position of the indi- vidual creditor groups has been significantly improved as opposed to normal insolvency proceedings in which the company would probably have been wound up.  

Back in business 

On 18 January 2016, when the application was made for “debtor in possession”, the company was over-indebted and insolvent. On 30 September 2016, after only eight months, the insolvency proceedings were ended and the company was able to continue business operations under its previous owner. All important business relationships with customers, suppliers and financial partners were maintained. Furthermore, the number of jobs at the company hardly changed.  

The detailed business plan, based on the restructuring con- cept, predicts growth of 4% per annum by the end of 2018 and the return to a rentability level typical for this business sector. Hence Pfeiffer Reisen has become sustainably com- petitive and is well set up for the future.