Champion Enterprises Inc., a leader in factory-built construction, today (Nov. 19) announced that it and its domestic operating subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
The company is taking this action to improve its capital structure and further strengthen its competitive position, according to a news release. The company’s operations in the United Kingdom and Canada were not included in and will not be impacted by the filing.
In conjunction with the filing, the Troy, Mich.-based company, which is supplied by many vendors who also serve the RV industry, has obtained a $40 million debtor-in-possession (DIP) credit facility from certain of its current lenders that will be available to fund post-petition operating expenses and to ensure that it continues to meet its obligations to employees, customers, and trade partners. A portion of these funds will be available for use outside the U.S. to ensure the continued adequacy of working capital for the company’s non-U.S. operations.
The company expects that this restructuring will be accomplished through a court-supervised sale of its operations. The company chose to pursue a broader sale process in which its lenders and others may participate after opting not to accept a third party offer for the company. To that end, the company’s investment banker has already received initial indications of interest from a number of parties expressing a desire to participate in this sale process over the coming weeks.
“Our company has operated for many years with a significant debt load. As we’ve had to downsize to keep up with the declining markets, this debt has become increasingly burdensome,” said Champion Chairman, President and CEO William C. Griffiths. “Despite our best efforts to reposition the company for diversified growth, the continued challenging economic conditions both here and abroad have negatively impacted our capacity for debt.
“As a result, management and the board decided that the Chapter 11 process provides us with the most timely and orderly means to restructure our debt obligations and facilitate a sale and recapitalization of the company so we can be best positioned to capitalize on future opportunities. Filing for Chapter 11 will allow us to maintain our going concern value for the benefit of our stakeholders while we address current market realities.”
Griffiths noted that in response to the challenging housing market and impaired capital markets, Champion has already successfully implemented a number of initiatives aimed at improving operating performance, including the reduction of overhead costs, closure or idling of 15 underperforming manufacturing facilities in the U.S. since mid-2006, staff reductions at operating plants to better match current demand levels, increased focus on multi-family, military and commercial sales opportunities and enhancement of single-family home product offerings.
“Our balance sheet is the problem, not our operations. The next step in our reorganization is to restructure our balance sheet and position our company to capitalize on the anticipated recovery in the residential and commercial construction markets,” said Griffiths.
The company filed its voluntary petitions in the U.S. Bankruptcy Court for the District of Delaware in Wilmington.