Country Coach, the financially ailing Junction City, Ore., RV maker, has yet to file a reorganization plan to get itself out of bankruptcy. And now a judge is demanding that company officials explain why he shouldn’t order that its assets be liquidated, according to The Register-Guard, Eugene, Ore.
A hearing on Country Coach’s Chapter 11 bankruptcy case is set for Oct. 22, at which time company officials will have to convince U.S. Bankruptcy Judge Albert Radcliffe that it has a viable plan for returning to profitability. If not, Radcliffe could order the case converted to a Chapter 7 case, which means its assets would be sold off to satisfy creditors, or he could dismiss the case outright, which would allow creditors to sue to seize the company’s assets.
The hearing could mark a turning point for Country Coach, which filed for bankruptcy protection in March so it could reorganize its finances while getting breathing room from creditors, chief among them California-based Wells Fargo Bank.
Country Coach, a privately held maker of luxury motorcoaches, closed its Junction City plant in November, putting about 500 employees out of work. It resumed production in April, although on a much smaller scale. Company officials have said between 100 and 120 employees have been working at the plant, turning out about one coach per week.
Company spokesman Matt Howard said Wednesday (Sept. 23) the plant has been shut the past two weeks, but the company is planning to reopen Monday. He declined to comment on legal issues.
Since it resumed production in April, Country Coach has posted losses of $6.8 million, according to a financial statement it filed with the court Sept. 15.
Judge Radcliffe initially set an Aug. 31 deadline for Country Coach to file a reorganization plan. That was extended, at the company’s request, to Sept. 15. Radcliffe said he wouldn’t consider further extensions unless Country Coach’s main creditor, Wells Fargo, agreed to extend its financing past Dec. 31. Country Coach lawyer Brandy Sargent said in a motion that Wells Fargo had agreed to extend the financing through Feb. 15 and asked that the deadline for filing a plan be extended to Oct. 15.
Sargent said the company recognizes that “there remains a material risk that it will not be able to proceed to confirmation of its plan,” and she outlined a series of hurdles Country Coach must clear to get its plan confirmed by the court. Those include coming to terms with its landlord, Lee Joint Ventures, with Wells Fargo, and with its would-be partner, Recreation Live LLC.
The U.S. Trustee’s office, meanwhile, objected to the company’s request for another extension. The company has not filed documents supporting its assertion that Wells Fargo has agreed to extend its financing, nor has Wells Fargo filed any documentation indicating that it agreed to an extension, according to a brief filed by Rebecca Kamitsuka, attorney for the U.S. Trustee.
Further, Kamitsuka said, when she asked a Country Coach lawyer for a copy of the loan modification agreement, he faxed her a single-page document, marked as Page 6 of 6, with just a signature page, but without the text of the agreement.
Country Coach, Kamitsuka wrote, “cannot hide the ball on these matters in its fiduciary capacity.”
Country Coach Inc. has lost $3.7 million over the past three months, a company official said Wednesday (June 24), but the Junction City, Ore.-based RV maker remains hopeful it can emerge from bankruptcy and attract investors sometime in 2010.
Testifying in U.S. Bankruptcy Court in Eugene, Ore., CFO Mark Andersen provided an overview of the company’s operations two months after it resumed production of luxury motorhomes at its Junction City factory, according to the Register-Guard, Eugene.
Judge Albert Radcliffe, after hearing evidence and arguments on a series of motions involving the company’s operations, summed up the company’s position as “precarious, but not hopeless.”
Radcliffe has set an Aug. 31 deadline for Country Coach to file a reorganization plan because its $11.5 million financing plan with Wells Fargo expires Dec. 31. On Wednesday, the judge denied Country Coach’s request to extend the deadline, but said he would reconsider if Wells Fargo agrees to provide financing beyond the end of the year.
Andersen said Country Coach is working with Wells Fargo Bank, its main creditor, on a new budget that would enable it to keep operating into the new year. And it wants to “establish a consistent pattern of sales” over several more months before approaching potential investors, he said.
Privately held Country Coach ceased production last November and filed for Chapter 11 bankruptcy protection in March.
Andersen said the company has sold six coaches since resuming production in April, and has taken a deposit for a seventh. But because it hasn’t met the sales goal it agreed on with Wells Fargo, Country Coach finds itself in default.
The bank is continuing to support Country Coach reorganization efforts, however, he said – an assertion that bank attorney Loren Scott confirmed to the judge.
About 120 employees are working at the plant, and the company may add 10 more in July and 10 more in the fall, Andersen said.
Sales have been slower than Country Coach anticipated, Andersen said. The bankruptcies of RV makers Monaco Coach Corp. and Fleetwood Enterprises Inc. earlier this year have driven down the price of motorhomes, he said.
Country Coach has been selling its motorhomes for 96% of its cost, he said. “Prices are holding up reasonably well,” he said.
June, July and August are typically the busiest sales months for motorhomes in the Northwest, Andersen said, and the company was hopeful that sales would pick up this summer.
Under questioning from Rebecca Kamitsuka, attorney for the U.S. Trustee’s Office, Andersen said Country Coach has lost $3.7 million in the past three months.
Kamitsuka objected to the company’s request that it be allowed to refund about $30,000 to Country Coach owners who paid money to attend a company-sponsored rally last year in Georgia that was canceled. She said creditors and employees owed vacation wages should be paid first.
But Andersen said the company faced a “significant backlash” when the rally was canceled and people lost their deposits. Each one of those people is a potential buyer of a Country Coach, he said, and “it’s critical for them to feel good about the business.”
The company views the move to refund those deposits as a marketing expense, he said.
Radcliffe agreed and allowed the company to reimburse the customers.
The judge also agreed to give Country Coach another 90 days to decide whether to renew or reject its lease with Lee Joint Ventures for its factory. Lee Joint Ventures objected to the extension, but Radcliffe granted the company’s request, which gives it until Oct. 1 to make a decision.
Four weeks after resuming production and adopting a new factory-direct business plan, Junction City, Ore.-based Country Coach Holdings LLC has sold two coaches and taken deposits on several others, a company spokesman said Monday (May 4).
“We’re roughly on schedule,” Matt Howard told The Register-Guard, Eugene. “We feel encouraged by the momentum.”
As part of an agreement with creditor Wells Fargo Bank, Country Coach is planning to sell about one coach per week. Country Coach officials spoke last Friday with representatives from Wells Fargo, and the company continues to feel positive about its conversations with the bank, he said.
Tom Unger, a Wells Fargo spokesman, said Monday that it was too early in the process for bank officials to express an opinion about Country Coach’s production and sales.
Country Coach, a privately held recreational vehicle maker, is in Chapter 11 bankruptcy, a legal process intended to give distressed companies time to reorganize their finances while getting breathing room from creditors.
The factory ceased production in mid-November, putting about 500 employees out of work. Under a deal reached with Wells Fargo, Country Coach resumed production April 6, albeit on a far smaller scale. About 100 workers are completing coaches at a rate of about one a week.
Under its new business model, Country Coach is attempting to sell its coaches direct from the factory, rather than through a dealer network as it has in the past. Whether the company can survive and emerge from bankruptcy depends on whether it can find enough customers willing to part with $300,000 or more for a luxury item at a time when the economy remains mired in recession.
The biggest challenge facing the company, Howard said, is a market that’s been flooded with discounted coaches as a result of the bankruptcies of rival RV makers Monaco Coach Corp. and Fleetwood Enterprises Inc.
“There’s so much inventory on the market that we need to make sure the value proposition of Country Coach is abundantly clear and we are not just another commodity,” he said.
The company delivered two coaches last week from the factory, one to a couple from California, the other to a couple from Alberta, Howard said. Neither had owned a Country Coach before, and both bought 2009 Magna 630s, one of Country Coach’s high-end models that retails for more than $600,000.
In addition, Country Coach has taken one deposit equal to more than half the value of the coach, plus several other smaller deposits, he said.
Howard announced the sales last week on Twitter, the micro-blogging, social networking site. Howard has been posting short messages to Twitter periodically for several weeks as an experiment. Country Coach has about 50 “followers” on Twitter.
“It takes minimal resources for us to do it,” he said.
Wells Fargo Bank has agreed to loan Country Coach up to $11.5 million so it can build up to 43 coaches during the next 10 months, according to an agreement filed in U.S. Bankruptcy Court in Eugene, Ore.
Under a new business model agreed to by the bank, the Junction City, Ore. RV maker would sell the coaches directly from its factory, bypassing dealers, according to a document filed by the company’s chief financial officer. Operations would be financed by a strictly supervised $11.5 million revolving loan fund, according to The Register-Guard, Eugene.
The new loan includes the $8.5 million that Country Coach already owes to Wells Fargo, bank spokesman Tom Unger said.
The bank had been seeking to seize and sell Country Coach’s assets after the company defaulted on the original loan.
Because Country Coach is in Chapter 11 bankruptcy, the new plan and the financing must be approved by a judge. A hearing is scheduled at 10 a.m. today (March 23) in U.S. Bankruptcy Court in Eugene. Chapter 11 bankruptcy gives a company protection from creditors while it attempts to re-organize its finances.
CEO Jay Howard announced March 19 that Country Coach had reached a financing deal with Wells Fargo, but in fact the deal was not yet done until later that day. Company lawyers filed a motion after the close of business that includes a 60-page loan agreement.
In asking for a hearing today, so soon after filing a 158-page document with the court, Country Coach lawyer Brandy Sargent urged the judge to recognize what she said is the urgent nature of the request.
“Approval of this motion and the interim order in a form satisfactory to Wells Fargo Bank is, simply, the only way that Country Coach believes it can survive as an enterprise,” she wrote.
The company has no significant operating funds, no ability to borrow under any other terms, and faces the prospect of Wells Fargo pressing its effort to liquidate the company’s assets if the deal is not approved, she said.
Country Coach’s factory and its remaining 500 workers have been idle since early December.
Bank spokesman Unger said because the matter is still pending and negotiations are continuing, Wells Fargo officials would have no comment until and unless the deal wins court approval, he said.
“This thing is pretty complicated,” Unger said.
It’s complicated because the agreement involves not just Country Coach and Wells Fargo, but also Riley Investment Management, a company controlled by Los Angeles investment banker Bryant Riley. Riley is the majority owner of Country Coach but he’s also a creditor: Country Coach owes his firm about $15 million, according to court documents.
Howard said the company plans to start bringing back workers to the Junction City factory as early as today to start working on unfinished coaches that are still on the production line, with production ramping up slowly over the next few weeks. Howard said more than 100 workers would be brought back. One of the workers to be called back said he was told the company planned to run a crew of 62.
Howard said the company has 15 unfinished coaches on the production line, and another 15 chassis ready to be built.
According to a proposed budget filed with the court, Country Coach plans to start selling coaches starting this week at a rate of one to two per week, for a total of 43 coaches by the first week of January.
The budget calls for Country Coach to spend $20.3 million over the 42 weeks, of which $18 million will be for operations and $2.3 million will be for bankruptcy expenses. During that time, the company expects to collect $23.5 million.
In a separate filing, Country Coach Chief Financial Officer Mark Andersen offered some details of the company’s new business plan.
By selling directly from its factory, Country Coach eliminates the need to maintain dealer agreements as well as agreements that require the company to buy back coaches dealers can’t sell, he said.
The company also plans to eliminate obsolete floor plans and streamline its existing model line. Country Coach now offers eight different models, ranging in price from $300,000 to $1.8 million.
In addition, Country Coach plans to consolidate its manufacturing operations from three plants to one, reduce its footprint of leased facilities by 30% and negotiate a temporary 50% reduction in lease costs for the rest of 2009.
Shannon Nill, general manager of Guaranty RV in Junction City, which has been selling Country Coach vehicles since the 1970s, said he was pleased to hear that the RV maker and the bank were able to strike a deal that enables the company to resume operations.
“This news with Country Coach is very good – very good for Oregon, for our community and for Guaranty,” he said.
If the company resumes production, that increases the value of the 30 or so Country Coach RVs that Guaranty has in stock, he said.
However, Nill expressed skepticism about the company’s plan to sell coaches directly from its factory, bypassing dealers.
Factory direct sales by RV makers “generally have not worked out,” he said. “The companies that have tried generally go back to dealerships. But these are different times. If this is what is required for the business to succeed, you can’t rule out that approach.”
One unknown factor is service, he said. Without a network of dealers to provide service, owners of Country Coach RVs presumably would have to come to Junction City for warranty service. And Nill said he’s not sure what Country Coach would do with trade-ins.
“There could be a role for Guaranty to purchase trade-ins and market existing used Country Coaches,” he said.