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Country Coach Recovery Has ‘Reasonable Chance’
Posted By RVBusiness On October 23, 2009 @ 9:01 am In Breaking News | 1 Comment
A judge decided Thursday to give Country Coach Holdings LLC a little more time to reorganize its business plan after concluding that the company has “at least a reasonable chance” to emerge from bankruptcy as a going concern.
“If this debtor can be saved, it’s in everybody’s interest,” U.S. Bankruptcy Judge Albert Radcliffe said near the end of a daylong hearing, according to the Register-Guard, Eugene, Ore.
Country Coach, a privately held maker of luxury motorhomes, closed its Junction City factory in November, putting about 500 employees out of work. The company filed for bankruptcy in March to reorganize its finances while getting breathing room from creditors.
The company resumed production in April, bringing back about 120 employees, with plans to turn out one coach per week. But the company has not met sales or production goals, and has been losing money at a rate of about $1 million a month, according to court testimony and documents.
The plant shut down briefly in July, and the assembly line has been shut down since the week of Sept. 11, Chief Financial Officer Mark Andersen testified.
Radcliffe rejected arguments from Rebecca Kamitsuka, attorney for U.S. Trustee Robert Miller, that the case should be dismissed. Doing so would allow creditors to move to liquidate the company’s assets “at fire-sale prices,” Radcliffe said.
“I fail to see who benefits from the dismissal of the case,” he said. “Its loss would be devastating to Junction City.”
Radcliffe set another hearing for next month and said he hopes to schedule a hearing to confirm the company’s reorganization plan by late January or early February.
Wells Fargo, the company’s main creditor, has agreed to extend financing through Feb. 15, said David Kurzweil, an attorney for the bank.
Kamitsuka had argued that the case should be dismissed because Country Coach had missed court-imposed deadlines for filing a reorganization plan and other documents, and because the company has lost $7.6 million since it resumed production in April and has just $1,000 left on its line of credit.
The company has no reasonable chance to recover, and its assets will continue to diminish in value, she said.
“Everybody wants jobs, but this company is going further and further in the hole,” Kamitsuka said. “This case has cratered.”
Under questioning from David Lavant, one of the company’s bankruptcy attorneys, CFO Andersen said he was not alarmed by the $7.6 million in losses because that number “is a measure of accounting activity.”
What the company needs to do to survive is create cash flow by selling coaches, even at deeply discounted prices, he said. The company is trying to sell coaches for more than their liquidation value, he said.
At the start of the hearing, Radcliffe heard a series of statements from Junction City civic leaders, Country Coach employees and vendors on how important the company is to the community.
“This is an important business in Junction City,” said Rick Kissock, executive director of the Junction City-Harrisburg Chamber of Commerce. “We need jobs. We don’t need empty buildings.”
Country Coach, which has been in Junction City since its founding in the 1970s, is “an integral part of the community” and a contributor to local causes and organizations, Junction City Administrator David Clyne said.
The company accounts for 10 % of the city’s property tax base, which helps the city pay for services such as police and parks.
Dave Swenson of API Inc., a Eugene auto paint maker, said Country Coach helped his company grow to 25 employees and $14 million in annual revenue. Since Country Coach fell on hard times, API is down to $4 million in revenue and 12 employees, he said.
Eugene lawyer Douglas Schultz, representing a committee of unsecured creditors, also urged Radcliffe to allow Country Coach to continue its reorganization efforts.
Unsecured creditors include suppliers, dealers and other parties who are owed money but will get paid only after the secured creditors get paid.Schultz said the company has struggled and not sold as many coaches as it intended. But he pointed to “one glaring fact”: Nearly all of Country Coach’s assets are encumbered by Wells Fargo Bank and investor Bryant Riley.
If the case were dismissed, Wells Fargo would foreclose to get back what it is owed, and Riley would get the rest, he said.
“The unsecured creditors would end up holding an empty bag,” he said.
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