MasterCraft plan avoids bankruptcy filing

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MasterCraft reports that it has found a way to return to viability without filing for bankruptcy protection, and is asking its vendors to accept a staged repayment plan or a discounted immediate payment.

While this is an out-of-court process, it will take a “significant amount of cash to restart production and normalize the company,” CEO John Dorton said in a June 5 letter to vendors.

“This is a very happy outcome compared to what it could have been and what else we’re seeing in the industry,” Dorton said in a phone message to Soundings Trade Only. “This will be out of court, and we’re just looking for our vendors to help us.”

Dorton is traveling today and could not be reached for further comment.

Vendors agreeing to the staged repayment will receive 25 percent of the full amount owed, on or before July 30. The balance will be paid in equal quarterly installments during the next four quarters beginning Sept. 30.

Vendors choosing the immediate payment agree to accept a 35 percent discount off the full balance and will receive payment of the remaining 65 percent July 15.

“MasterCraft is in the process of restructuring our balance sheet to deliver and generate the liquidity to ensure our ongoing viability,” Dorton said in the letter.

“More specifically, we have reached an agreement in principle to convert our existing bond debt into a combination of 1) the equity of the company and 2) a very manageable revised debt load, which will require no cash debt service going forward,” he added.

The restructuring is being accomplished through the support of Wayzata Investment Partners, the company’s largest bondholder. Wayzata is a Minneapolis-based investment firm with more than $5 billion in assets, according to a statement released by MasterCraft.

“The company and Wayzata have arranged for this restructuring to take place out of court, which will allow MasterCraft to avoid the damage and distraction to our business that would be caused by a bankruptcy filing,” Dorton said in the letter.

The company, Dorton said, is seeing reduced dealer inventories, zero factory inventory, and a demand for its 2010 models. He expects the company to begin building boats regularly beginning July 6.

“Our pipeline is considerably healthier today than it was last year,” Dorton said in a statement released this morning by the company. “Today we have zero stock boats at the factory and 35 percent less inventory in our worldwide dealer network.”

Dorton noted that the last nine months have been challenging for the Vonore, Tenn.-based builder of ski, wakeboard and luxury performance powerboats.

Unit shipments declined 56 percent from fiscal 2008 to fiscal 2009 and, as a result, MasterCraft went into “crisis cash management mode in order to maintain our liquidity,” Dorton said in the letter to vendors.

This meant laying off the majority of the work force, significantly curtailing production, and reducing wages and benefits for remaining employees.

Dorton emphasized that the company will proceed cautiously.

“We are taking this opportunity to be both leaner and smarter in all areas of our business, and we are confident that, following this restructuring, MasterCraft’s industry-leading liquidity, balance sheet and inventory pipeline will position the company for significant growth when the market recovers,” he said in the statement.

— Beth Rosenberg

b.rosenberg@tradeonlytoday.com

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Comments

15 comments on “MasterCraft plan avoids bankruptcy filing

  1. Curtis

    Seems to me these investment guys are way over abusing the bankrupty thing. Now they are going to screw over the people that help them put their boats on the water. I hope the vendors start to get smarter and ask for COD on all future orders. Screw me once shame on you, screw me twice shame on me.
    I think these investment guys need to suck it up and pay their vendors what is due them. Maybe the next time Mastercraft orders a gauge package the vendor should only send 65% of the gauges in the dash. I wonder if that would work for Mastercraft.

  2. arch

    I’ve been saying for YEARS that these increases in boat prices were entirely unsustainable.  $50,000 to $100,000 for a ski boat?  REALLY?  Well, guess what?  Every person who bought one has now lost 30-60%.  You think they will be rushing out to buy one again, even after the recession is over?  THINK AGAIN.
    This isn’t a Mastercraft problem, it’s an industry problem.  Market forces will bring back reality and common sense.  When business does come back, it won’t be the same business that left in 2008.
    I hope the builders and the industry as a whole are prepared.      

  3. Minigma

    I suppose you would prefer they file chapter 11. Which could in turn be worse news for their vendors. In order to emerge from this it would be better if companies work together instead of fighting. All companies can emerge  stronger in the long run.

  4. Joe Public

    Really, it’s just a boat, who cares. It’s not like medicare is going to fall apart. Oh wait, to late.
     
    The next time Mastercraft trys to sell a $124.000 boat it might think about who might be buying this boat.

  5. Gordy McKelvey

    Master Craft needs to get back the basics of building ski and wakeboard boats. Trying to be all things to all boaters was/ is a huge mistake. They messed up with the Wet Jet fiasco and they just about went down trying to support the water ski pro tour years ago.
    Hire Rob Shirley back and let him get the place rolling again.

  6. Bill WalterCPA

    The higher content/price of MC boats have been the most popular sellers for them.  Heck, look at the numbers – they currently have the highest market share in the ski segment.
    Many marine suppliers are truly suffering in this economy – especially those who serve many boat OEMs.  Vendors of MC can now be made whole…it’s their choice.
    And by the way, Rob Shirley did try to come back to the market…the company was called “Infinity”…..

  7. Grand Man

    The MasterCraft plan is a viable strategy that allows the suppliers to be paid, at their choosen repayment plan. It makes the company in a much better financial position, and continue to provide the market with competitive models and prices.
    Bankruptcy is certainly an option for eliminating debt, but it hurts vendors and dealers up and down the supply chain. At least MasterCraft has offered a repayment plan which will allow everyone to be paid, even if it is on a scheduled time frame.
    The management team is among the best in the industry. Increased market share, low inventories, in a down market would indicate the Sales and Marketing team is very much ahead of the game. I would expect others to try the same thing, if they have interested Venture Capital prospects.

  8. Curtis

    If all OEMs file for bankruptcy to make thier company stronger who is going to keep the vendors in bussiness so parts can be supplied to OEM’s.
    Do you think the management team has taken a pay cut, probably not.
     

  9. JohnA

    Our family has been skiing for decades and currently owns a 205 V (2001) and a 2008 197 (ProVersion)–we love the boats for skiing and wakeboarding (only use).  We now ski in the open water of the Chesapeake Bay.  Over the years, the boats have gotten jazzed up and pricey.  It seems to survive in the new world order, Mastercraft, like everyone else, needs a deep rethink. What made MC great in the first place?What does customers really careabout? What makes for a great dealer? How to do the boats get services when dealer network is thin?
     

  10. Grand Man

    What happens when you go round and round doing the samething?
    You create a rut, and if you continue to keeping going around, the rut becomes a hole. The challenge is to know when to step UP and get out of the hole. If you stay, the chances are you will not survive.
    MasterCraft has challenged the traditional marketing strategies the past several years with inovation in designs, and models. Their dealers have grown their market share, while others have lost.
    The Sales leadership listens to the market and developes their startegy. It would appear the new models have successfully hit the target.  The old days of building the samething, or doing business in the same way has proven to be detemential in a segmented market. Using experience and history lead to better rewards in growth.

  11. Old Hickory

    In my opinion, the only foolish people in this mix are the fools at Wayzata who are throwing millions more at an egotistical management team which is going to get their clock cleaned over the next 12 months and then Wayzata can sell shut it down, sell it off, and recoup a percentage of their wasteful investment.

  12. jP

    You guys keep drinking the Kool Aid!  MC sends a letter to suppliers asking them to check a box to determine whether they will be paid a 35% discount on AR or paid in full over the next 4 quarters.  You call that good management?  I call that cowardly.  You want to work it out then call your suppliers in and talk to them man to man!  
    Is this the way you want the industry to work going forward?  Your obligations mean nothing?  You will be the next victim…

  13. Grand Man

    Yes, I refer to the good Sales management for growing market share in a down market.  MasterCraft isn’t the company that has closed a plant and moved operations, and hasn’t run from obligations.  All companies, including MasterCraft has had to make substantial reductions, I’m sure, in their management salaries and workforce personnel. As almost all companies have done so far.  They did what was neccessary to manage their business expenses, while maintaining growth.
    Every major boat company has talked with their suppliers weekly, and almost daily. They talk with the financial institutions weekly getting updates on dealers etc. The cowards you speak of are the ones which do not inform their suppliers of how bad things are, and then file Chapter 11 and catch everyone by surprise.
    MasterCraft suppliers have a choice for full payment over time, or a discounted price for immediate payment. It is no different than negociating with bank for a better rate, on better terms.  This is not what one big company did or tried to do. They surprised everyone and announced they were cutting their losses.
    These actions are the ones that not only hurts the immediate suppiers, but the entire industry. The reductions are felt throughout the supply chain, and they damage the creditability of the good companies trying to survive and do the right thing…. work with vendors and dealers.
    If things aren’t agreed upon with the court filings, and people getting represented don’t be surprised to see this go even further, and really get worse for suppiers and dealers.

  14. former employee

    mr GRAND MAN…..plz talk to the employees that has been terminated after recieving a lay-off notice..I dont think you would even think of owning a Mastercraft boat. They are NOT bring back employee in order of senority . For an example a man with 8 months was called back to a job as said ” any monkey ca do” while there are people out with 20 YEARS with this company… What this company need is the feds to get involved with age discrimanation..They have no respect for the same people who built this company..As management says now “ITS MY WAY OR THE HIGHWAY”..May John Dorton enjoy his Hummers ,farms while ceo of mastercraft….

  15. cbeyer

    I have a 89 maristar 240 (27 feet overall w/platform) with a 454 and love the boat.  No wood, 20 years old and 1000 hours.  Use it in big water on Lake St. Clair near Detroit.  Goes in the low 40s which allows me to get off the water in bad weather but still tube the kids all day while dealing with the occasional wake of a 40 foot + boat going by on a Saturday. Fuel burn is not too bad at 25 mph cruise.  Rec skiing is great as is wakeboarding.  People constantly ask me who makes the boat (decals are gone).  In short, a great open bow day boat with 2 foot draft.  Nobody is doing inboards on small day boats anymore but I love it due to simplicity and reliability.  This boat is far from a prostar 190 but for joe average, it is way better for general use since it rides great and is safer with its decent free board.  I bought it used and now have about 8K total into it including trailer.  Best 8K I ever spent.  Wife and kids love it.  There are many ski boats on Michigan inland lakes, but nothing like this on bigger water.  What did MC do?  They downsized it to a maristar 225 whose usefulness in big water is terrible if there are large boats in the vicinity with big wakes.  Just too small.  In effect, MC bailed on a big water boat that could go on a trailer for a reasonable price.  This is where their problem started.  Sure you can buy a 280 now but for 100K+ which makes it unobtainium for most boaters.
    To replace this day boat, the price would be upwards of 55-70K+.  This is crazy pricing.  Considering there is no head, no place to sleep, I think MC needs to rethink things.  They need a cheap high quality bigger day boat with no frills and good power like I have.  If you are hung up on a prostar, then fine but don’t build a close bow anymore and build it bare bones with about 300 HP for 25K.  MC would sell a ton of them.  There are just way too many bells and whistles on the new MC boats that I could care less about.  This includes big speakers and board racks.  You want ballast, put in a bigger fuel tank and fill it up.  Also the 220 CSX is just too small and too much money for a fishing boat to be of any use.  It should have been 28 feet to have a chance.  MC needs to stop thinking inland lakes.  They own that market and that is ok.  But, seen it, done it, check.  How expensive do they think they can make a 19-21 foot boat with no free board?
    MC is the best constructed boat in its price class you can buy period.  I wish they made a no frills light weight 30 foot overnight boat on a trailer with an inboard as carefully.  The sheer weight would make it better than any wakeboard boat they have now.  Everybody else building cheaper overnight cruisers are still using wood and they are all destined to fall apart.
    My 89 Maristar will be around for another 20 years.  Can’t say that for many boats.  Sure, it is not perfect, but darn close.

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