Dallas-based Reddy Ice prepares for bankruptcy

Reddy Ice Holdings Inc., maker of packaged ice, is preparing to enter into Chapter 11 bankruptcy protection, The Wall Street Journal reported.

The Dallas-based company could file for bankruptcy sometime this week. The company and their bankruptcy attorney could file for a pre-arranged restructuring plan in order to limit their time in court.

A hedge fund, Centerbridge, will purchase the company’s debt in exchange for majority ownership of Reddy Ice, which is largest producer of packaged ice goods in the U.S.

Reddy Ice has about $450 million in debts and takes in about $330 in annual sales. The company has faced slowing sales amid competition from freezing and packing machines used by stores that can now package their own ice.

The bankruptcy may pave the way for Reddy Ice to merge with ice-packaging company Artic Ice that recently filed for bankruptcy in Canada. A merger of these two companies would allow them to be more competitive with smaller ice-packaging operations.  

Both Artic and Reddy were the targets of an anti-trust investigation by the U.S. which began in 2005 and cost them millions in legal fees. This sent both companies on a downward spiral and coincided with the global recession.

Insolvent companies often have no other option than to retain a bankruptcy lawyer and chose a bankruptcy plan to reduce their debt liabilities. Under the filing recommended by a bankruptcy attorney an individual or business can put an end to collection activities and return to financial stability.