Indy Bank Didn’t Give Carriage a ‘Fair Shake’
Is 45-year-old Carriage Inc.’s plight an example of the kind of tough banking policies that the nation’s been facing since the recession and that continue to hurt — more than help — the U.S. economy?
Or is the Millersburg, Ind., company’s dilemma simply a case of a bank that finally lost its patience after a lengthy period of loan extensions and ultimately did what it had to do by filing suit against its client?
PNC Bank out of Indianapolis filed suit Tuesday (Oct. 18) to take possession of Carriage, a well-respected RV builder that owes the bank more than $5 million. The suit came a day after 180 Carriage workers were furloughed at the financially troubled firm.
The bank is demanding immediate payment of overdue loans from the bank, which maintains in the suit in Elkhart County Superior Court I that Carriage owner Glenn Cushman has been in default of his financial obligations to PNC Bank from as far back as September of 2009, requiring the issuance of several loan extensions, The Goshen News reports.
While a PNC official declined comment, spokesmen for Carriage, which manufactures the Cabo, Cameo, Carri-Lite and Royals International towable RV lines at its rural Elkhart County complex, feel they haven’t gotten a fair shake from a mega-bank that isn’t really interested in a workable plan and the general welfare of one small Hoosier town.
“We’ve had an outpouring of concern from Carriage owners, 90 dealers, nothing but positive support for us, and it’s sad,” says Ed Kinney, vice president of sales and marketing for Carriage. “It affects 200 people in the community, the vendors and dealers nationwide and in Canada. Actually, we’ve got units on line right now that are supposed to be going to England, and the bank won’t work with us to make this work.”
“We’ve got a bunch of units sitting off line, short parts,” he added, “and everything we’ve got in the system right now is retail sold to be delivered to customers. I mean, that’s what’s crazy.”
In fact, Kinney, an RV-building veteran, says Carriage’s situation reminds him of why some people are demonstrating in the streets right now because he’s convinced that Carriage is a viable company today, and he’s not alone in that view.
“You know what?” he asked, “I can sit right here now and say as an American citizen that I can understand why these people are protesting banks and Wall Street the way they are, because it’s happening right here in Millersburg, Ind., and it’s sad.”
Just as outspoken is Rick Van Es, who was hired six weeks ago at the request of PNC Bank to engineer a restructuring of the company. Van Es says that he’s questioned from the outset the intentions of Carriage’s lead creditor, PNC Bank, to forge an earnest plan to save the company.
“I found this process with PNC to be inconsistent and curious at best,” said Van Es, a certified restructuring advisor and CPA who feels that PNC has been more interested in him serving as an advisor rather than a take-charge chief restructuring officer who ran the company, made decisions and stood a realistic chance of pulling the firm out of an admitted financial hole.
Fact is, Van Es claims PNC officials never seemed real interested in talking to him at all, and never required him to assemble a turnaround plan, although he went ahead and did it, anyway. “We submitted the turnaround plan to (Carriage) management last week,” said Van Es of the proposal, which called for an immediate tamping down of expenses. “Management accepted the plan wholeheartedly, and their board was ready to implement my plan. And we began implementing it immediately.
“I submitted that plan to the bank, and I heard no comment,” he continued. “This plan restores the company to profitability within 30 days. And the company, even though it was not required by the bank, was willing to give me full executive authority to implement the plan.”
Thus, Van Es says he and Carriage’s management were “blindsided” by Tuesday’s suit filing. “We were very much blindsided because the other thing that has happened here is that the company was requested to find replacement financing for PNC. PNC had suggested that if the company could replace its operating line of credit — and also bring in enough money to pay down the mortgage to an 85% loan-to-value — that the bank would be happy to continue to move forward with the company.
“The company raised all the money that was required to achieve that, and we actually have not only commitment letters from those lenders, we were actually reviewing contracts and got to the point where our new lenders asked PNC for payoff letters, and PNC would not provide them. At the end of the day, what PNC said was ‘we’re not interested; we’re going to file a suit.’
“So we have money on the sidelines, and that would pay PNC down substantially and restore the banking relationship to what I would call a commercially reasonable relationship in terms of the amount borrowed,” Van Es noted. “And that, combined with the turnaround plan that I have authority to execute, would mean that Carriage would be a viable enterprise going forward.”
Van Es emphasizes that Carriage never missed a payment to PNC, even though it did violate some covenants and was admittedly feeling the pain of the recent recession. “But this is a company that met it’s obligations,” he said. “Granted, it was not profitable. The bank had every reason to be anxious and dissatisfied, and I don’t fault the bank one minute for that. But we just don’t understand their reluctance to support us when we have a viable enterprise and we have raised money that they asked us to raise from other sources to pay down on their debt. Fact is, they told us that ‘if you can’t pay us all the way off, we’re not interested.’”
Bottom line, says Van Es, he and Carriage’s management are at their “wit’s end” with the whole sequence of events and, especially, with the effect that Carriage’s failure could have on Millersburg.
“We are one of two employers in Millersburg,” Van Es said, “and this is going to devastate their local economy, and for no good reason because, one, we believe we are viable and, secondly, we have the financing in place to reduce the debt at PNC. And we believe in six months we could pay PNC off entirely. That’s not a good reason to put 200 people into the unemployment line.”
So, what does Carriage really want at this point?
“Frankly, we are hoping that we can get a meeting with PNC’s management,” he said. “To this point, we have been unable to do so because I believe that what’s missing in this equation – and I was hired rather late in the process, and I understand the bank had some fatigue by then, which is normal. However, my frustration is that we as business people have not been able to communicate with the bank because I think they’ve had their mind made up all along.”