Santa Ana-based oil change chain EZ Lube LLC has filed for bankruptcy protection.
EZ Lube, which runs 82 stores in California and Arizona, has lined up financing and plans to restructure and sell off operations to a group of investors.
The company, which was founded in 1988 and has piggybacked on the growth of Royal Dutch Shell PLC’s Jiffy Lube International Inc., cited worsening conditions that have led drivers to forgo auto services, according to a Bloomberg report.
“The high gas prices experienced over much of 2008 resulted in customers driving fewer miles on average, and thus, oil changes and other services have been needed less frequently,” said Stephen V. Coffey, EZ Lube’s chief restructuring officer.
Coffey recently served as chief executive of Irvine’s Diedrich Coffee Inc.
EZ Lube said in court papers it has $100 million and $500 million in both assets and debts. Unsecured creditors include Exxon Mobil Corp.
The company plans to borrow more than $60 million from a group of lenders led by Goldman Sachs Group Inc.
EZ Lube also hopes to sell assets in an auction using what’s known as a stalking horse bidder.
Stalking horse bidders are selected by bankrupt companies to make an initial, opening bid on assets and ward off lowball offers. Other potential buyers could counter with offers higher than that of the stalking horse bidder.
EZ Lube’s stalking horse is EZ Lube Acquisition Co., made up of existing investors.
Entrepreneurs Mike Dobson and Rick Teasta started EZ Lube 20 years ago and built it up by operating their own stores rather than franchising.
A couple of years ago, the partners sold a large stake in EZ Lube to a group of investors, including New York-based hedge fund GSO Capital Partners and Goldman Sachs Specialty Lending Group LP, which is providing financing to the company during bankruptcy.
In January, the company was ordered to pay $5 million in a civil settlement for unfair business practices.
The settlement came after a two-year investigation by the Orange County district attorney’s office and the state Bureau of Automotive Repair.
Chief Executive Marc Graham now runs EZ Lube.
