Monaco Coach Corp., which not so long ago was a major employer in Junction City, Ore., and in Indiana and a national power in the RV industry, has been reduced to a handful of properties that will be sold or be subject to foreclosure by creditors, according to the Register-Guard, Eugene, Ore.
On Tuesday (June 23), a judge agreed to the company’s request to convert its Chapter 11 bankruptcy filing, which gives it the protection of the court while it deals with financial matters, to a Chapter 7 case so it can liquidate its remaining assets: seven pieces of real estate in Oregon, Indiana and Florida.
The Oregon real estate is all that’s left after Monaco Coach sold its major assets – factories, inventory, brands and intellectual property – to Navistar International Corp. earlier this month for $47 million, and RV resort properties in California, Nevada, Florida and Michigan to assorted buyers for about $16 million.
Navistar intends to revive the brand as Monaco RV LLC and resume production at its Coburg factory, but it has not yet said when that will happen or how many people it will employ.
“It’s a work in progress,” Navistar spokesman Roy Wiley said Tuesday. “It takes time.” And, given current market conditions, he said, “there’s no sense to rush.”
At a brief hearing Tuesday in U.S. Bankruptcy Court in Delaware, Monaco Coach attorney Timothy Cairns said the company was unable to come to terms with its major secured creditors, Bank of America and Ableco Finance, to obtain a continuing line of credit that would enable it to sell off its remaining properties.
The lenders were willing to let Monaco continue in Chapter 11 so it could sell off those properties. But the parties couldn’t agree on how much money would be left over for other creditors, or on a budget that enabled Monaco Coach to take the necessary steps to sell the properties, said Rob Orgel, one of Monaco’s bankruptcy attorneys.
Judge Kevin Carey agreed to sign an order converting the case to Chapter 7, effective June 30.
Once Monaco’s case is converted to Chapter 7, a U.S. trustee will be appointed to oversee selling off the remaining assets and convert them to cash, Orgel said.
If the trustee determines he doesn’t have the cash to properly sell off the properties, they may be abandoned, and the creditors will have to foreclose to get their money, he said.
“The likely result is the trustee will talk to the lenders and work out a deal we couldn’t work out,” he said. “They’ll work out a deal or the trustee will tell them to go to foreclosure and get your money that way.”
Orgel said it’s not clear what the seven properties are worth, but he estimated between $5 and $15 million – nowhere near enough to pay off unsecured creditors, who are owed somewhere between $50 million and $100 million.
A conversion to a Chapter 7 case effectively spells the end of Monaco Coach Corp., said Andrea Coles-Bjerre, an assistant law professor at the University of Oregon and a former bankruptcy lawyer in New York.
Once the remaining assets are liquidated under Chapter 7, “the entity ceases to exist,” she said.
Monaco Coach was founded in 1968 in Junction City as Caribou Coach Co. It changed its name to Monaco in the 1970s and became a publicly traded company in 1993.
Monaco ceased production last December after a brutal 2008. It filed for Chapter 11 bankruptcy protection in March and terminated 2,000 workers who had been idle since December.
About 100 employees remain on the job at the Coburg plant.