Integrated Electrical Services Files For Bankruptcy Protection Under Chapter 11

Integrated Electrical Services (IES), Houston, and all of its domestic subsidiaries filed for Chapter 11 reorganization. The petition was filed in the U.S. Bankruptcy Court for the Northern District of Texas.

The filing comes after IES, one of the nation’s largest electrical contractors, spent about three months with noteholders on a restructuring plan. IES listed $400.8 million in assets and $385.5 million in debts in its petition, and it claimed about $1.1 billion in revenue for the fiscal year ending Sept. 30, 2005.

Its largest two unsecured claims are owed on its two series of notes, to U.S. Bank and Bank of New York Inc., respectively. The following three claims are held by trade creditors: Graybar Electric Co. ($3.9 million), followed by Rexel Inc. ($1.9 million) and General Electric Supply Co. ($1.9 million).

IES said it filed the Chapter 11 bankruptcy cases to facilitate the implementation of a prenegotiated agreement between the company and an ad hoc committee comprised of the company’s subordinated noteholders that will result in a significant reduction of the company’s long-term debt.

IES is seeking bankruptcy court approval for its $80 million debtor-in-possession financing (DIP) facility with Bank of America. Subject to the approval of the bankruptcy court, the DIP facility will be comprised of an $80 million revolving credit facility, with a $72 million sub-limit for letters of credit, and will supplement the company’s existing liquidity and allow IES to meet its obligations related to the operation of its businesses, fulfill its payroll obligations and pay vendors for goods and services.

Under the proposed restructuring, Integrated said that creditors who currently own 58 percent of Integrated’s senior subordinated notes have agreed to exchange all their notes for shares representing about 82 percent of the reorganized company. Holders of IES’ outstanding common stock will receive stock representing about 15 percent of the reorganized company, while management will own 3 percent.

IES said it plans to operate its businesses as usual during the bankruptcy cases.

One electrical distributor whom IES owes well over $100,000, said the bankruptcy filing comes as no surprise because he had talked with the company about their Chapter 11 plans some time ago. This electrical distributor said the situation with Key Electrical Supply, Houston, which IES owns, will be particularly interesting.

"If the creditors of Key are paid, I would think that other unsecured creditors would have to be paid too. The only profitable part of IES’s business was Houston Stafford, Stafford, Texas. Their main supplier is Key, which is owned by IES."