DALLAS Financial troubles that Coach America Holdings Inc. struggled to contain throughout 2011 bubbled over at years end, sending the motorcoach company into Federal Bankruptcy Court.

The largest tour-and-charter bus operator in North America filed a voluntary petition for Chapter 11 bankruptcy protection and reorganization in U.S. Bankruptcy Court in Wilmington, Del.

The companys two-dozen affiliates that operate its fleet of 3,000 motorcoaches and vans under the Coach America, American Coach Lines, CUSA, Grey Line and other brands also filed the petitions, a common practice in bankruptcy filings.

Coach America said the filings early this month came after it was unable to restructure more than $400 million of debt, and were necessary for it to be able to continue operating competitively.

George Maney, president and chief executive, said that while the court proceedings progress operations will continue uninterrupted, advance ticket purchases and reservations will be honored, suppliers will get their money, and the companys 6,000 employees will be paid and maintain their benefits.

"I want to emphasize that it will be business as usual for Coach America throughout the Chapter 11 process and we look forward to a right-sized capital structure that will enhance our competitiveness and ability to serve our customers going forward," he said.

Maney noted that the company has, for too long, been constrained by its capital structure and the decision to file bankruptcy protection will ensure a stronger company focused on delivering transportation services to its customers across the country.

Meantime, he reported that a commitment has been obtained for $30 million in debtor-in-pocession financing from a group of existing senior lenders led by JPMorgan Chase. The financing, he said, will help the companys fleet investment and assure normal business operations.

"We appreciate the support and commitment of our lending group and debt holders and are focused on an effective, expeditious process to enhance Coach Americas competitiveness and value for all stakeholders," added Brian Cejka, chief restructuring officer.

Although the filing was not much of a surprise to those who have been closely tracking the company, it was met with understanding and optimism by motorcoach industry spokesmen, who acknowledged the impact of the national economic downturn and slow-paced recovery.

Ken Presley, vice president and chief operating officer of the United Motorcoach Association, said he was saddened by the necessity of Coach America's financial reorganization.

"It is no secret our nation's economic recovery has been slow. Coach America employs some of the most talented professionals in our industry. They have been and remain committed to safe and exceptional standards for the traveling public. We wish them a speedy reorganization and hopes for a bright future," he said.

American Bus Association spokesman Dan Ronan said his organization respects what he called the "difficult decision" made by the leadership of Coach America to seek bankruptcy reorganization.

"We are sure this decision was made after careful consideration. With a strong customer base and diverse services, we are confident that after restructuring their debt, Coach America will continue to be a thriving company and one of the leaders in the industry," he said.

Coach Americas financial troubles have been carefully watched by analysts since 2007, when it was acquired by Fenway Partners of New York City, its current equity sponsor.

It reported that Coach America lost $207 million during the past two years, including $180 million in 2010 and $27 million through November of last year.

The losses became a significant issue early in 2011 when Moodys Investors Services downgraded Coach Americas credit rating, questioning whether it could meet its debt payments and warning it might have to engineer a financial restructuring.

The downgrade reduced the companys "corporate family rating" and "probability of default rating" from B3 to Caa1 and Caa3, respectively.

Within two weeks of the downgrade, Coach America announced it had entered into an amended senior-secured credit program that included a $25 million equity investment from its owners and the conversion of in $24.5 million in second-lien debt held by an affiliate of the companys shareholders into common equity.

The debt-to-equity swap reportedly reduced Coach Americas second-lien debt to just over $20 million from $55 million. Its total debt before the announcement was about $370 million.

That deal got Coach American through 2011, but by year end the string ran out again. Standard & Poors red flagged the problems by reducing Coach Americas corporate credit rating from B- to CCC.

S&P credit analyst Lisa Jenkins warned in a late December report the company could violate its debt covenants without financial support from its equity sponsor.

That downgrade was quickly followed by the Chapter 11 filing, which will allow the company to attempt to right its financial woes and possibly emerge as leaner company.

The company said it is accelerating its discussions with lenders on a restructuring that will position it for growth.