Genmar files for Chapter 11

AMG · Jun 2, 2009

Breaking News - Genmar files for Chapter 11 bankruptcy protection.The second-largest boat builder in America said tighter loan requirements pushed it into bankruptcy protection:

Genmar files for Chapter 11 bankruptcy protection

Genmar Holdings, the second-largest boatbuilder in the US, filed for Chapter 11 bankruptcy protection on Monday. A petition filed in the US Bankruptcy Court in Minnesota listed the assets of the company as US$237.5m, with liabilities of US$216.5m.

Genmar chairman Irwin Jacobs told the Minneapolis Star-Tribune that the the bankruptcy petition does not include more than US$400m in intangible assets. Wells Fargo and Fifth Third bank, the only secured creditors, are owed US$75m. The bankruptcy petition also listed 20 other creditors.

"If someone would have said to me as recently as even one month ago that Genmar would someday be filing for Chapter 11, I would have said it was not even a remote possibility," said Jacobs in a statement. "I've always looked for ways to enhance Genmar's balance sheet and felt that even though business conditions were incredibly difficult, there were alternatives available." But Jacobs told the paper that tighter loan requirements from the bank pushed it into Chapter 11 bankruptcy protection. "Despite restructuring steps and infusion of significant equity, the bank reduced [credit] availability," its bankruptcy documents read. "The bank rejected all...proposals for making adequate capital available and continued to reduce the borrowing base."

According to the story, Jacobs holds about 40 per cent of the company's stock, and other major shareholders include the family of the late Carl Pohlad, which holds about 15 per cent.

"Genmar has received a commitment for Debtor-in-Possession (DIP) financing proposal from the Wells Fargo and Fifth Third banks that will be submitted for approval to the bankruptcy court in the first bankruptcy hearing scheduled to take place within the next few days," said Jacobs. "Additionally in the first court hearing, Genmar will be asking the bankruptcy court for approval to allow Genmar to pay appropriate dealer warranty and rebate claims. Genmar currently has over $100m of current assets as well as substantial additional fixed assets and intangible assets that we believe will allow Genmar to come through and exit the Chapter 11 proceedings as a financially stable and strong company."

None of Jacobs' other companies, which includes Jacobs Trading, Jacobs Management, Watkins, FLW Outdoors or Jacobs Interactive, are included in the bankruptcy filings. The filing also does not include VEC Technology LLC.

Jacobs said Genmar's revenues for the year ending June 30 should drop by more than half to about US$460m. The company will have an operating loss of $32m to $35m for the year, compared with a cash operating profit of US$9.7m in 2008.

In order to control costs, Jacobs said, Genmar has cut its workforce in the last 18 months from about 4,500 to about 1,500. Genmar has more than 1,000 dealers, but that number has declined by about 20 per cent since early 2008. Jacobs told the paper that about 30 per cent of Genmar's current dealers "are just hanging on."

"We believe that Genmar will have access to sufficient cash and has current assets available to support our ongoing businesses to service and build dealer boat orders and pay our vendor suppliers on future purchases promptly," Jacobs said in the statement. "I have every reason to believe that GE Finance will continue their Genmar dealer floor plan financing program subject to the Court's approval, which will take place over the next few days."

Jacobs said the company will submit its reorganisation plan "as soon as possible." The plan will include "Genmar's short and long-term plans and objectives in ultimately successfully exiting the Chapter 11 proceedings," Jacobs added.

By IBI Magazine
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lwrandall · Jun 2, 2009

ANOTHER sad story. For everybody sake I hope this bleeding stops soon.

Just in case you are not familiar with the brands Genmar makes. With the two more well known brands at the top.

Marquis
Carver

Champion
FinCraft
Four Winns
Glastron
Hydra-Sports
Larson

Ranger
Seaswirl
Stratos
Triumph
Wellcraft
Windsor Craft

Pascal · Jun 2, 2009

I wonder how it's going to affect warranty coverage... in quotes I saw somewhere else, they said they need to ask the court to make payments to dealers for outstanding warranty work.

unlike GM/chrysler ownes/buyers who received assurance from our COIC that warranties will be honored, this is going to be a problem for boat owners and buyers even though many of the important warranties are offered by system supliers. Still, this coudl put dealers in a bind...

K1W1 · Jun 2, 2009

Hi,

Pascal- What is the COIC?

Pascal · Jun 2, 2009

normally the US has a Commander In Chief... now we have a Community Organizer In Chief! a couple of months ago he assured US car buyers that the government will stand behind the big 3 new car warranties no matter what. that's a luxury boat buyers don't have.

SeattleMike · Jun 2, 2009

Warranties will be fine, if you can...

... still find a dealer?

This is Chapter 11 re-org filing, not a chapter 7 liquidation filing, and they apparently have secured debtor-in-possession financing. Essentially, junior bondholders and stockholders are going to get wiped out and the court will sort out which debtors get paid and which get to eat dirt.

It's interesting that Obama spent months lobbying for, and succeeded in getting, a stimulus package and TARP funds that were specifically sold as prevention for this kind of bankruptcy. The banks are getting access to massive amount of cheap money specifically so they can roll over this kind of commercial paper without endangering their own "solvency", and yet both WFC and FTB told Genmar "no". Even more interesting, they seem to have no problem loaning them enough to get through Chapter 11.

Any warranty will get honored, but the selection of dealer service shops may be limited after this. I am more concerned about the sudden inability of WFC and FTB to roll over the loans.

Loren Schweizer · Jun 2, 2009

"Irv The Liquidator" (as he was known, back in the day) will be asking the bankruptcy court for approval to allow Genmar to pay "...appropriate dealer warranty and rebate claims...".

Seems to me, you don't need to ask anyone's permission to pay 100% of a waranty claim...or rebates...

K1W1 · Jun 2, 2009

Loren Schweizer said:

"Irv The Liquidator" (as he was known, back in the day) will be asking the bankruptcy court for approval to allow Genmar to pay "...appropriate dealer warranty and rebate claims...".

Seems to me, you don't need to ask anyone's permission to pay 100% of a waranty claim...or rebates...
Click to expand...

Hi,

So Loren- Does thos article describe the guy you mentioned in your post?

http://findarticles.com/p/articles/mi_m0BQK/is_1_7/ai_81760365/

Loren Schweizer · Jun 2, 2009

K1W1 said:

Hi,

So Loren- Does thos article describe the guy you mentioned in your post?

http://findarticles.com/p/articles/mi_m0BQK/is_1_7/ai_81760365/
Click to expand...

Yup.
Mr. Jacobs is, first and foremost, a Businessman. Not mentioned in your article is how he (as a kid) and his father gathered old cast-off grain sacks along the railroad tracks to make a buck way back when. A businessman with such humble beginnings is undoubtedly practiced at finding the edge, the angle, and still playing by the rules, is able to realize a gain, however small.

So, maybe (if I read it right) he reorganizes via the courts and is able to slough off some accounts payables in the way of rebates & warranties.

Doesn't make him a bad guy.

K1W1 · Jun 2, 2009

Hi,

Pascal- Your Community Organizer in Chief has even managed to have an influence on cars and their warranties in Australia and NZ. I always said Australia would be the 51st State, I guess NZ could be the P.R. of the Pacific

http://www.stuff.co.nz/business/industries/2466244/Holden-on-We-re-part-of-new-GM

Loren Schweizer · Jun 2, 2009

Not only that, K1W1, but if you play your cards right, he'll keep those pesky Chinese imports out of your hair as well.

Jorge Lang · Jun 2, 2009

Since the U.S. government is in the auto business, maybe they'll get in the the yacht building business too. First,G.M. (Government Motors), next Genmar (Government ENterprising in MARine)

SeattleMike · Jun 2, 2009

Jorge Lang said:

Since the U.S. government is in the auto business, maybe they'll get in the the yacht building business too. First,G.M. (Government Motors), next Genmar (Government ENterprising in MARine)
Click to expand...

No chance; unless there is a immediate formation of a boatworker's union that contributes heavily to the President's re-election campaign and to the campaign's of their congressional Representatives, there is no political benefit to saving and industry that caters to the priviledged.

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Genmar files for Chapter 11

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