Judge OK’s Country Coach Financing Plan
A bankruptcy judge gave final approval Monday (April 13) to a complex financing agreement that gives new life to Country Coach Inc., at least for the next few months.
The new Country Coach is far smaller than the old Country Coach, according to The Register-Guard, Eugene, Ore. Whether the Junction City, Ore., company can survive and emerge from bankruptcy depends on whether it can find enough customers willing to part with $300,000 or more to buy its luxury motorcoaches at a time when the economy remains deeply mired in recession.
U.S. Bankruptcy Judge Albert Radcliffe approved the financing deal between Country Coach and Wells Fargo Bank, which runs through the end of the year. He gave the parties until Aug. 31 to provide an update on how the plan is working.
Jim Howard, a Country Coach vice president, said the news was welcome but not unexpected. Radcliffe had given the deal preliminary approval two weeks ago.
“The bottom line is, it’s a lot better for everybody if we continue than if we don’t,” Howard said.
The company’s Junction City factory resumed production last week, working to finish partially completed coaches at a rate of one per week.
The company’s first 2010 model, a 43-foot-long Inspire 360, was to depart today for “The Rally” this weekend in Albuquerque, N.M.
About 94 employees were at work Monday, Howard said, close to the number that Country Coach expects to employ for the foreseeable future. At its peak in 2006, the company had about 1,800 workers.
When Country Coach idled its factory in November, about 500 employees were put out of work.
Country Coach entered Chapter 11 bankruptcy in February after Wells Fargo moved aggressively to seize the company’s assets. Country Coach had defaulted on an $8 million loan balance, and the bank sued in an effort to collect on the debt, intending to liquidate the company’s assets.
The bankruptcy filing gave Country Coach some breathing room, including time to negotiate with Wells Fargo. Last month, the two sides agreed on a plan in which Wells Fargo would give the company access to a $3.2 million revolving loan fund to allow it to carry out a plan to sell its coaches directly from the factory, rather than through a dealer network.
Radcliffe approved the deal despite a number of concerns raised by Rebecca Kamitsuka, attorney for the U.S. Trustee’s office. Several of Kamitsuka’s objections involved consumer protection issues.
For example, she said down payments for new coaches should go into escrow, so customers would be able to get their money back if the company were to fail. She said if the company is planning to honor warranties for its new coaches, it should have a warranty reserve fund. And about 238 2006-08 Country Coach models are subject to a recall because they would lose their power steering – perhaps the company should set aside money to pay for that work, she said.
David Levant, attorney for Country Coach, said down payments will be segregated into a separate bank account that Wells Fargo should not have access to if Country Coach defaults. He said Country Coach has budgeted funds to perform warranty work and plans to offer customers third-party warranties. As for the recalls, Country Coach will address those as part of its normal course of business. If the financing plan was not approved, the company would not be able to perform any recall work, he said.
In approving the agreement, Radcliffe said no deal is perfect, and he noted that Douglas Schultz, attorney for the unsecured creditors committee, expressed his support for the plan.
“The court places great weight on the creditors committee’s support,” he said.
Country Coach has about nine completed 2008-09 models ready to be sold, and about 40 coaches in various states of completion that would be sold as 2010 models, Chief Financial Officer Mark Andersen told the court two weeks ago.
Jim Howard expressed optimism that the company will be ready to emerge from bankruptcy by the end of August.
While the market for RVs remains difficult, he said only about half of coach buyers finance their purchases, and usually not for the whole amount. Nationwide, people have been buying an average of 2½ to three Country Coaches a week from dealers during the past four to five months.
To spur sales, Howard and his sales crew have systematically been contacting 6,500 people who already own Country Coach motorhomes. They’re specifically targeting about 800 people who own 2006 models who are most likely to want to trade in for a 2010 model, he said. They’re using e-mail, letters, a revamped website and even a new billboard on Interstate 5 to generate interest, he said.