MINNEAPOLIS, Minn. – In the wake of news late yesterday that Genmar Holdings, Inc. has filed for Chapter 11 reorganization protection in the U.S. Bankruptcy Court, the industry is questioning the impact to be felt in the coming weeks and months.
“I’m nervous for the industry as a whole,” said Phil Miklo, owner of Oak Hill Marina Inc., a Four Winns dealer. “If Genmar is as solid as they told us they were, how solid is the rest of the industry?”
At the Marine Dealer Convention & Expo this past November, Genmar Chairman and CEO Irwin Jacobs was applauded when he told dealers he would work to keep Genmar brands out of liquidation houses and to offer new floorplan financing solutions. In an exclusive interview with Boating Industry magazine at the Miami International Boat Show in February, he expressed confidence in his company’s future and pride in its accomplishments, built on boat brands many of which were purchased out of bankruptcy.
“We’re a large company relative to the market place, and we’re going through all the normal stress and pain everybody goes through,” he said in the interview. “But we do have a plan. I’ve put a lot of money into our business over the last month, and I’ll be putting more into it. I know that, but I’m not a public company. I don’t have to worry about earnings per share. I’m into it for the long haul.”
Now, many are left feeling duped. Since the beginning of the year, Genmar’s support for its dealers seems to have been uneven, depending in part on the level of 2009 product being ordered. Some dealers report receiving aggressive manufacturer incentives. Others tell of months of unpaid warranty claims.
That leaves Genmar dealers with more questions than answers about what is to come. “What is going to be the warranty procedure going forward?” asks Miklo. “The procedure for parts? Boats? Those are the questions I have.”
But dealers aren’t the only ones with questions. Many of Genmar’s suppliers are small businesses that may be unable to absorb the impact of large unpaid debts.
“How are we going to support the suppliers, the guys that build the dashes and gauges for us?” Miklo adds. “I don’t know how much money is owed to them. But there’s going to be a major loss. We may lose them out of the industry totally.”
While Jacobs said in the Genmar statement that the company has access to cash and assets to build boats ordered and pay vendors on future purchases and will ask the bankruptcy court to allow it to pay dealer warranty and rebate claims, concern over the outcome remains.
Certainly, much is at stake for the industry. Ultimately, if dealers and suppliers struggle to adapt to this new development, the effects will also likely trickle down to Genmar’s boat building peers, as well as boat owners themselves.
Genmar reports bankruptcy filing
Despite the unprecedented conditions the market has been facing, Jacobs expressed surprise at the bankruptcy filing in Genmar’s statement.
“I have been in the boating industry for over 30 years, and throughout those many years, I have personally experienced several of what I thought were the worst and most difficult business conditions our industry had ever gone through,” stated Jacobs in the statement released last night. “However, those conditions do not even remotely resemble anything close to what has taken place in the retail and wholesale recreational boating industry over the past approximately 12 months. If someone would have said to me as recently as even one month ago that Genmar would someday be filing for Chapter 11, I would have said it was not even a remote possibility.”
Jacobs explained the outcome, stating that he “didn’t have the necessary time to complete any alternative financing acceptable to the banks.”
In court filings, Genmar suggested tighter requirements from its banks propelled it into bankruptcy, according to an article in the Star Tribune.
"Despite restructuring steps and infusion of significant equity, the bank reduced [credit] availability," the documents said. "The bank rejected all ... proposals for making adequate capital available and continued to reduce the borrowing base."
Jacobs is the largest Genmar shareholder, owning about 40 percent of its stock, the newspaper reported. Genmar’s Chapter 11 petition listed assets of $237.5 million and liabilities of $216.5 million, which doesn’t include more than $400 million in intangible assets, according to the newspaper article.
“…it is important that every interested party affected by Genmar’s situation knows that we plan on successfully reorganizing and ultimately coming out of Chapter 11 as a stronger and better company with a bright and stable future ahead in the recreational boating industry,” Jacobs stated in the press release. “I know I can speak for everyone within Genmar, including myself, that we are fully committed not only to getting through the very difficult and stressful times that are ahead of us, but we’re committed to attempting to do everything humanly possible throughout the Chapter 11 proceedings in trying to help each Genmar dealer, vendor, and employee as best we can.”
Jacobs said he believes GE Finance will continue their Genmar dealer floor plan financing program, subject to the Court’s approval, which will take place over the next few days.
“We believe that Genmar will have access to sufficient cash and has current assets available to support our ongoing businesses to service and build dealer boat orders and pay our vendor suppliers on future purchases promptly,” he stated. “Genmar has received a commitment for Debtor-in-Possession (DIP) financing proposal from the Wells Fargo and Fifth Third banks that will be submitted for approval to the bankruptcy court in the first bankruptcy hearing scheduled to take place within the next few days. Additionally in the first court hearing, Genmar will be asking the bankruptcy court for approval to allow Genmar to pay appropriate dealer warranty and rebate claims.”
Genmar reported that it has over $100 million of current assets, “as well as substantial additional fixed assets and intangible assets that we believe will allow Genmar to come through and exit the Chapter 11 proceedings as a financially stable and strong company with a great future ahead of it in the boating industry,” said Jacobs.
Genmar will be submitting an overall reorganization plan for approval to the bankruptcy court “as soon as possible,” according to Jacobs. It is expected to include “the necessary details for all interested parties to better understand Genmar’s short and long-term plans and objectives in ultimately successfully exiting the Chapter 11 proceedings.”
Genmar, with approximately 1,500 employees and five manufacturing centers, is the builder of 15 brands of recreational boats which include Carver, Champion, FinCraft, Four Winns, Glastron, Hydra-Sports, Larson, Marquis, Ranger, Scarab, Seaswirl, Stratos, Triumph, Wellcraft, and Windsor Craft. Genmar boats are sold worldwide
through its approximately 1,100 dealers.
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