March 4, 2019 − Magnum Construction Management (f/k/a Munilla Construction Management, “MCM” or the “Company”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of Florida, lead case number 19-12821. The Company, a family-owned, Miami-based, construction company specializing in heavy civil construction, is represented by Jordi Guso of Berger Singerman LLP. Further board-authorized engagements include (i) Gulf Atlantic Capital Corporation ("GACC") as financial advisors and (ii) Kurtzman Carson Consultants LLC as claims agent.
The Company’s petition notes between 1,000 and 5,000 creditors, estimated assets of $98.8mn and estimated liabilities of $47.5mn. Documents filed with the Court list the Company's three largest unsecured creditors as (i) Core & Main LP, f/k/a HD Supply Waterworks, Ltd., ($4.2mn disputed trade debt), (ii) American Express Travel Related Services Company ($3.8mn credit card debt) and (iii) T.Y. Lin International ($1.7mn disputed trade debt).
Florida International University Bridge Collapse
In August of 2017, MCM began construction of a pedestrian bridge over Miami’s Southwest Eighth Street and on March 15, 2018 the partially finished structure collapsed killing six people. MCM is being sued by survivors of the collapse and by families of victims. Press reports note that federal investigators have pointed to design flaws that led to cracking on the 174-foot bridge, but the investigation has not yet assigned blame. MCM supervised construction of the structure under a state contract with Florida International University ("FIU").
Chapter 11 Goals
In a declaration in support of the Chapter 11 filing (the “Ruizcalderon Declaration”) [Docket No. 8], Gilberto Ruizcalderon, MCM's Chief Financial Officer, detailed the Company’s goals in respect of the Chapter 11 filing. The Ruizcalderon Declaration states, “The Debtor commenced this Chapter 11 Case in order to implement a comprehensive restructuring following the catastrophic collapse of the Florida International University Pedestrian Bridge; stabilize its operations for the benefit of its customers, secured creditors, employees, vendors and other unsecured creditors; and propose a mechanism to efficiently address and resolve contingent claims. To be clear, the filing of this Chapter 11 Case is not the end-result of a strategy, or an attempt, to avoid any responsibility that might be assigned to the Debtor for the heartbreaking and tragic loss of life following the catastrophic collapse of the Florida International University Pedestrian Bridge. Rather, the Debtor commenced this Chapter 11 Case after a comprehensive review of all realistic alternatives and the consideration and balancing of a variety of factors, including (i) the Debtor’s need for incremental liquidity to be provided under the debtor-in-possession financing arrangements to complete its pending bonded contracts; (ii) the need for an orderly, fair and expeditious process to assess and resolve the Debtor’s potential liabilities resulting from the collapse of the Florida International University Pedestrian Bridge; and (ii) how to best preserve and maximize the value of the Debtor’s business enterprise for the benefit of all of its economic stakeholders. More generally, chapter 11 provides the unique opportunity for all of the claims asserted and that may be subsequently asserted against the Debtor arising from the bridge collapse to be addressed comprehensively in one forum. It will …avoid the risk that, due to the Debtor’s financial condition, those claimants having their wrongful death and personal injury claims dealt with earlier in the state court process will fare substantially better than other similarly situated claimants.
In a press release announcing the filing, MGM advised that, “It is implementing a restructuring and recapitalization of the Company through a substantially pre-negotiated Chapter 11 plan of reorganization. Chapter 11 provides the opportunity for all of the claims asserted against the Company, including those arising from the failure of the University City Prosperity Project, to be addressed comprehensively in one forum. The restructuring has the support of MCM’s sureties. The filing of the Chapter 11 Case is not an attempt to avoid any responsibility that might be assigned to the Company for the collapse of the bridge. The Company intends to resolve those claims as part of the restructuring.
Events Leading to the Chapter 11 Filing
The Ruizcalderon Declaration states, “MCM was the contractor on the FIU Pedestrian Bridge that collapsed on March 15, 2018. The cause of the tragic collapse remains under investigation by the National Traffic Safety Board (the ‘NTSB’). MCM is a party to the NTSB investigation and is fully cooperating with the NTSB. As of the date hereof, MCM is a defendant in 18 lawsuits alleging personal injuries or wrongful death arising from the accident. While MCM’s insurer is currently defending these claims under a reservation of rights, MCM has lost its Florida Department of Transportation certifications and approximately $200 million in potential revenue from future projects. The culmination of these tragic events materially constrained MCM’s liquidity and its ability to generate revenue such that the Company cannot meet its ongoing obligations.
Insurance Coverage Capped at $42mn
According to the Company, MCM's insurance coverage is likely to be capped at $42mn. The Ruizcalderon Declaration states, "MCM has coverage with policy limits totalling approximately $42mn under policies of insurance issued by Greenwich Insurance Company, XL Insurance America, Inc., Indian Harbor Insurance Company…collectively referred to as the “Insurers.” MCM and the Insurers have been engaged in good faith negotiations regarding the Insurers’ contribution of the policy limits to enable MCM to establish a settlement trust or fund that MCM believes will enable MCM to fully resolve all claims asserted against MCM relating to the collapse of the FIU Pedestrian Bridge. Under this proposal the Insurers would pay the applicable policy limits of the insurance policies, totaling approximately $42 million, thereby fully and completely exhausting the policy limits and extinguishing each Insurer’s obligations under the insurance policies, in consideration of MCM’s agreement to fully and completely release each Insurer from any and all claims arising out of, relating to or in any way involving the collapse of the FIU Pedestrian Bridge. MCM has requested that the insures contribute the proceeds from the insurance policies to a trust or fund for the exclusive benefit of all claims arising from, relating to or in any way involving the collapse of the FIU Pedestrian Bridge, which claims would be channeled exclusively to the trust or fund."
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