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Country Coach Position: ‘Precarious But Not Hopeless’
Posted By RV Business On June 25, 2009 @ 9:14 am In Breaking News | 2 Comments
Country Coach Inc. has lost $3.7 million over the past three months, a company official said Wednesday (June 24), but the Junction City, Ore.-based RV maker remains hopeful it can emerge from bankruptcy and attract investors sometime in 2010.
Testifying in U.S. Bankruptcy Court in Eugene, Ore., CFO Mark Andersen provided an overview of the company’s operations two months after it resumed production of luxury motorhomes at its Junction City factory, according to the Register-Guard, Eugene.
Judge Albert Radcliffe, after hearing evidence and arguments on a series of motions involving the company’s operations, summed up the company’s position as “precarious, but not hopeless.”
Radcliffe has set an Aug. 31 deadline for Country Coach to file a reorganization plan because its $11.5 million financing plan with Wells Fargo expires Dec. 31. On Wednesday, the judge denied Country Coach’s request to extend the deadline, but said he would reconsider if Wells Fargo agrees to provide financing beyond the end of the year.
Andersen said Country Coach is working with Wells Fargo Bank, its main creditor, on a new budget that would enable it to keep operating into the new year. And it wants to “establish a consistent pattern of sales” over several more months before approaching potential investors, he said.
Privately held Country Coach ceased production last November and filed for Chapter 11 bankruptcy protection in March.
Andersen said the company has sold six coaches since resuming production in April, and has taken a deposit for a seventh. But because it hasn’t met the sales goal it agreed on with Wells Fargo, Country Coach finds itself in default.
The bank is continuing to support Country Coach reorganization efforts, however, he said – an assertion that bank attorney Loren Scott confirmed to the judge.
About 120 employees are working at the plant, and the company may add 10 more in July and 10 more in the fall, Andersen said.
Sales have been slower than Country Coach anticipated, Andersen said. The bankruptcies of RV makers Monaco Coach Corp. and Fleetwood Enterprises Inc. earlier this year have driven down the price of motorhomes, he said.
Country Coach has been selling its motorhomes for 96% of its cost, he said. “Prices are holding up reasonably well,” he said.
June, July and August are typically the busiest sales months for motorhomes in the Northwest, Andersen said, and the company was hopeful that sales would pick up this summer.
Under questioning from Rebecca Kamitsuka, attorney for the U.S. Trustee’s Office, Andersen said Country Coach has lost $3.7 million in the past three months.
Kamitsuka objected to the company’s request that it be allowed to refund about $30,000 to Country Coach owners who paid money to attend a company-sponsored rally last year in Georgia that was canceled. She said creditors and employees owed vacation wages should be paid first.
But Andersen said the company faced a “significant backlash” when the rally was canceled and people lost their deposits. Each one of those people is a potential buyer of a Country Coach, he said, and “it’s critical for them to feel good about the business.”
The company views the move to refund those deposits as a marketing expense, he said.
Radcliffe agreed and allowed the company to reimburse the customers.
The judge also agreed to give Country Coach another 90 days to decide whether to renew or reject its lease with Lee Joint Ventures for its factory. Lee Joint Ventures objected to the extension, but Radcliffe granted the company’s request, which gives it until Oct. 1 to make a decision.
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