Judge OKs sale of Genmar companies - Trade Only Today

Judge OKs sale of Genmar companies

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Irwin Jacobs comes away with two yacht lines, but key dealer questions remain unresolved

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Genmar Holdings was once the world's second-largest manufacturer and distributor of fiberglass powerboats. Now, all of its boat lines are in the hands of other owners.

A sale of the company's assets was scheduled to close Jan. 20 following a bankruptcy court's Jan. 13 approval of all bids for the assets. The approval came despite objections by the Official Committee of Unsecured Creditors and one of the unsuccessful bidders.

California-based Platinum Equity purchased the majority of Genmar Holdings' assets for $70 million. The brands it now owns include Ranger, Stratos, Champion, Wellcraft, Four Winns, Larson, Glastron, Seaswirl, FinCraft and others. J&D Acquisitions purchased Carver and Marquis for $6.05 million. J&D was established by Genmar founder Irwin Jacobs and billionaire businessman John Paul DeJoria, who, among other ventures, formed John Paul Mitchell Systems with hairdresser Paul Mitchell.

MCBC Hydra Boats, a subsidiary of Wayzata Investment Partners, purchased Hydra-Sports for $1 million. Wayzata Investment Partners also owns MasterCraft Boat Co. MasterCraft CEO John Dorton, who will hold the same title with Hydra-Sports, says the plan is to move the Hydra-Sports tooling and molds to MasterCraft's Vonore, Tenn., plant and begin production in late spring for the 2011 model year.

Jacobs will be dealing

When Genmar filed for Chapter 11 bankruptcy protection last June, Jacobs originally had intended to reorganize, but last fall he changed direction, and moved toward a sale of its assets instead.

"We are pleased with the results of the auction process and look forward to bringing closure to this transaction so that the businesses can refocus their energies and resources on sales and service without the inherent distractions of being in bankruptcy," says chief restructuring officer Mark Sheffert.

Mark Barnhill, a principal with Platinum Equity, says he could not comment on the deal. "The transaction has not yet been completed and remains under the supervision of the U.S. Bankruptcy Court," Barnhill says. "Until the sale is completed, it would be premature and inappropriate to discuss any operational plans for the business."

Platinum Equity was founded in 1995 and has completed nearly 100 acquisitions. Among its more recent purchases are the San Diego Union-Tribune newspaper, Canvas Systems, Pomeroy IT Solutions, and DAUM Commercial Real Estate Services.

Citing Platinum Equity's $11.4 billion in revenue and series of acquisitions in 2008, the Los Angeles Business Journal recently named it the largest private company in L.A., Platinum Equity says on its Web site.

Following the auction, Jacobs told Soundings Trade Only he was "euphoric" about the outcome and felt the companies were in good hands. He also says he plans to purchase certain assets back from Platinum Equity after the court hearing, including the Larson brand and its factory, FinCraft and Seaswirl.

"I told [Platinum Equity] there were certain things I was interested in that I know they had no interest in, but they purchased them to get the thing done, and it is our intention to sit down in good faith when they get done in court securing the court's approval for everything," Jacobs says.

"They will negotiate with me in good faith and sell me these assets so I can keep these factories open, and they've assured me that they will deal fairly with me and [they] appreciate the way that I've dealt with them," he says.

Still some uncertainty

Though the sale is complete, uncertainty remains for thousands of unsecured creditors, dealers and former and current employees of the Genmar boat lines. An estimated 4,000 unsecured creditors are owed more than $100 million, according to documents filed in court by the Official Committee of Unsecured Creditors. The committee had asked the judge to set aside the results of the auction or, alternatively, deny approval of Jacobs' bid for the Carver and Marquis lines.

The committee said it appeared the aggregate amount of the prevailing bids would not satisfy the secured claims and the Chapter 11 administrative expense claims, and would provide nothing for the prepetition unsecured creditors as a group.

"Wells Fargo Bank and Fifth Third - as the first and primary secured creditors - will likely receive most, or possibly all, of their secured debt," the committee says. "GE Commercial Distribution Finance Corp., as a second secured priority, will likely receive some, but not all, of its debt. The remaining creditors will not receive any repayment unless and until all secured parties are paid in full."

The committee also objected to the decision to award J&D Acquisitions the winning bid for the yacht group brands and the facilities in Pulaski, Wis., over an identical bid made by Genmar Yacht Acquisition, which the committee says is an affiliate of Patriarch Partners LLC. GYA also filed its own objection in the case.

J&D, in court documents, called the committee's objection "nothing more than anger directed at an individual owner of a bankrupt debtor who is not legally responsible to pay the debtors' debts to unsecured creditors, who may, unfortunately, go unpaid."

Dealers await answers

Dealers and former employees also were unsure of what to expect. "We're glad the resolution is coming. I'm well aware of the fact that the resolution is not here yet," says Ed Lofgren, president and CEO of Massachusetts-based 3A Marine Service, which sells Four Winns and Seaswirl boats.

"It seems we're working toward that at a little brisker pace than what's happened in the last few months, and that means we can get on with the business of doing business," says Lofgren, who also serves as chairman of the Marine Retailers Association of America. "This has hurt dealers. Basically, there's a reluctance to sell what you can't back, and we haven't been totally sure of who we have backing us."

Steve Grams, a Larson, Glastron, Seaswirl and FinCraft warranty rep in Little Falls, Minn., for the last 13 years, was laid off in September for what was supposed to be two to three weeks and is still out of work.

"It looks as though the saga is not over for me and others in Little Falls, as Mr. Jacobs states that he intends to try to purchase the Little Falls operation from the high bidder," he says. "I hope he is successful in that endeavor."

This article orginally appeared in the February 2010 issue.

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