Since Fleetwood Enterprises Inc. filed for Chapter 11 bankruptcy on March 10, the Riverside, Calif.-based RV maker indicated that securing financing was vital to its survival.
On Wednesday (April 29), three hours before Fleetwood was scheduled to ask the judge in its Chapter 11 bankruptcy case to sign off on a final $80 million debtor-in-possession financing plan with Bank of America, the company told the court it didn’t need it, according to The Press-Enterprise, Riverside.
Instead, Fleetwood officials say they’ll be better off using cash collateral they had access to originally, allowing them to focus on operations while trying to find a buyer for the entire company, or its RV or manufactured housing divisions.
Company officials wouldn’t say how long they expect the cash collateral to fund their operations. In the court filing, they estimated they have at least $156 million worth of raw materials, finished but unsold goods, real estate and current work that can either be sold or used to get loans.
In court filings, Fleetwood said the financing plan with Bank of America, which took weeks to craft before the judge approved it temporarily, included “unrealistic” financial and time constraints and cost too much to implement. The filing mentioned a $2.4 million fee that it has already paid Bank of America for crafting the plan.
Fleetwood has cut costs, and sales have been slightly better than they expected, leaving the company with more cash than anticipated, according to Fleetwood’s Wednesday court filings.
The company continues to close plants, like its manufactured housing operation in Glendale, Ariz., which will be shuttered and consolidated with its Riverside plant. The company hopes to sell its La Grande, Ore., travel trailer plant for $1.8 million.
At the Wednesday afternoon hearing held at the U.S. Bankruptcy Court in Riverside, Bank of America lawyer Gregory Lunt bristled at the indication that the $2.4 million fee could be refunded and told the judge the first he had heard of Fleetwood’s proposal was that morning. An assistant had read the new proposal to him over the phone while he drove from Los Angeles to Riverside, he said.
“We have not had a chance to really look through these things,” he said.
To give Bank of America more time to respond, Judge Meredith Jury continued the hearing until May 13 at 1:30 p.m.
Lawyers representing unsecured creditors and Deutsche Bank, the trustee for bonds that were issued by Fleetwood in December, were pleased with Fleetwood’s decision to rely on cash collateral instead.
Even though Monaco Coach Corp. has struck a deal to sell its major assets to a subsidiary of Navistar International for $52 million, the Coburg, Ore.-based RV maker is racing to close the deal before it runs out of money and creditors run out of patience, according to The Register-Guard, Eugene, Ore.
At a hearing Friday (April 24) in U.S. Bankruptcy Court in Delaware, an attorney for Monaco said the company had signed an asset purchase agreement with Workhorse International Holding Co., a Navistar subsidiary. The company’s main secured lenders – Bank of America and Ableco – have agreed to provide it with at least one more week of operating cash while Monaco officials try to “get them comfortable” with what they would be paid in the sale, said Robert Orgel, one of Monaco’s bankruptcy attorneys.
“How much they are to be paid is the key issue,” Orgel said. “The amount it takes to satisfy them may well be harder to achieve the longer it takes us to close a sale because we are incurring expenses every day and the ability to sell assets is limited.”
When it filed for Chapter 11 bankruptcy on March 5, Monaco owed Bank of America $38 million and Ableco $37 million. In a Chapter 11 case, a financially stressed company is given protection from creditors while it reorganizes its finances.
Orgel asked Judge Kevin Carey for an expedited schedule so the company could be put up for auction and the deal could be consummated by June 1. If the sale doesn’t close by then, creditors could move to liquidate Monaco.
But an attorney for the committee for unsecured creditors, Donald Detweiler, told the judge that the sale appears to benefit only the two lenders. Liquidation of Monaco’s assets or some other alternative may provide a better return to unsecured creditors, he said.
“There may be a better way to see value than what’s being proposed here,” he said.
Carey said he expects any reorganization plan to provide some value for unsecured creditors.
“The court can’t create value when value isn’t there, but I want a fair shot at unsecured creditors getting there,” he said.
Unsecured creditors are those that don’t have any legal claim on a company’s land, buildings or equipment. They get paid only after creditors with secured positions, often banks, get paid. If they get paid, unsecured creditors are likely to get something less than the total amount they’re owed. The company has thousands of unsecured creditors.
In a court filing, Monaco attorneys argued that an asset sale to a buyer that would operate the RV maker as a going business would provide the most benefit to everyone concerned. Doing so would “create direct value for creditors, saving 2,000 or more jobs in communities in Oregon and Indiana … and creating ongoing value and revenue for a large number of (Monaco) vendors, dealers and other creditors.”
It’s not clear from the company’s court filings how many people would be employed in Coburg and Indiana if the factory were to resume production.
Navistar, a massive Illinois corporation that builds diesel engines, school buses, heavy trucks and military vehicles, announced a month ago that it had signed a nonbinding letter of intent to buy Monaco’s core assets for up to $50 million. On Wednesday (April 22), Monaco signed an asset purchase agreement with Workhorse, a Navistar subsidiary serving as a “stalking horse” purchaser. In bankruptcy cases, a stalking horse bid sets a threshold price so that other potential bidders can’t low-ball the purchase price.
Judge Carey will conduct another hearing this week on bid procedures and other issues, including whether the secured creditors are willing to extend additional operating credit to Monaco while the sale moves forward. A sales auction would be conducted in mid-May, followed by another hearing May 22 at which Monaco would be seeking court approval for a sale and creditors could seek to block it.
Under the terms of the deal, Navistar would obtain certain manufacturing facilities located in Indiana and Oregon. In addition, Navistar will acquire all brands, intellectual property, inventories and equipment relating to Monaco’s motorized and towable recreational vehicle segments.
The deal would not include Monaco’s resort properties, which the company is attempting to auction separately. Nor would it include its Roadmaster Cargo Trailer business and several industrial properties.
“We are excited to move forward with the tremendous resources of Navistar supporting our great products,” Monaco CEO Kay Toolson said. “Everyone at the company is ready and committed to again build the highest quality RVs in the industry, offer the best customer support and bring jobs back into the communities in which we operate. We appreciate the patience of our employees, dealers, suppliers and RV owners as we navigated through this challenging environment.”
The company said it appears that no proceeds from the sale would be available for distribution to shareholders.
An urgent plan by Country Coach and its bank to restart RV manufacturing operations in Junction City, Ore., was detoured Monday (March 23) in U.S. Bankruptcy Court.
Judge Albert Radcliffe, responding to concerns from the trustee in the case, delayed a decision on a proposed settlement agreement until all parties can work out unresolved issues, according to The Register-Guard, Eugene.
Lawyers for Country Coach, Wells Fargo Bank, the U.S. Trustee Program and unsecured creditors of the RV maker told Radcliffe at the end of a stop-and-go day of hearings that they hope to settle those differences and submit what is called a stipulated order to the court by Thursday afternoon.
That order would take effect immediately, and would lay out an interim plan for renewed operations. Based on negotiations that were conducted between hearings on Monday, the plan is likely to include a $3.2 million revolving loan from Wells Fargo that would allow Country Coach to operate for three to four weeks.
“There is a strong sense that Country Coach needs to restart quickly if it wants to restart successfully,” the company’s attorney, David Levant of the Portland firm Stoel Rives, told the judge on Monday.
After the interim period, a permanent restructuring plan would take effect. Based on a document filed in bankruptcy court last week, that longer-term business plan would be financed by expanding the revolving loan to $11.5 million – including $8.5 million that Country Coach already owes to Wells Fargo.
Radcliffe set a hearing for April 13 for a final decision on the restructuring plan.
Rebecca Kamitsuka, an attorney with the U.S. Trustee Program in Eugene, maintained at Monday’s hearing began that a financing agreement between Country Coach and Wells Fargo that was filed late last week was “overreaching and onerous.”
She told the judge that neither she nor Eugene lawyer Doug Schultz – who was hired Monday morning to represent a committee of unsecured creditors – had been given adequate time to read and respond to the 158-page document.
“We need to slow down and allow the parties to review (the agreement),” Kamitsuka said.
Schultz agreed with the trustee’s suggestion.
“I think there’s a lot of work to be done yet on this order before it can pass muster,” he said.
Radcliffe eventually ordered a 1½-hour recess in the hearing, during which the attorneys negotiated over terms of the settlement agreement.
When the hearing resumed, Levant – the Country Coach attorney – said there had been “considerable progress” in the negotiations, but asked to be allowed to continue the talks over the next few days.
Radcliffe then scheduled a hearing for next Monday to decide how the case will proceed if the parties do not come to an agreement this week. If a stipulated order is filed, as expected, next week’s hearing will be canceled.
Because Country Coach is in Chapter 11 bankruptcy, it must have its restructured operating plan and financing agreements authorized by the judge.
The company has no significant operating funds, and had to work with Wells Fargo to restructure debt and borrow additional money. The bank could push to liquidate Country Coach’s assets if the deal is not approved.
According to Country Coach CEO Jay Howard, the company has 15 unfinished coaches on the production line and another 15 chassis ready to be built.
A proposed budget filed with the court indicates the company plans to start selling coaches within a week of restarting operations, at a rate of one to two per week.
The company would switch to factory-direct sales, collecting a total of $23.5 million for 43 coaches by early next January and spending a total of $20.3 million – including $2.3 million for bankruptcy expenses.
The company is expected to bring back as many as 100 workers for the limited restart of operations.
Country Coach and its 500 employees have been idle since early December.