Judge will allow him to sell company to new Donzi/Pro-Line owner, which would retain him at the helm
A bankruptcy judge in North Carolina has ruled that Fountain Powerboat Industries can reorganize with Liberty Associates and is not required to sell its assets to FB Investments, although that group had made an unopposed credit bid of $8.75 million for Fountain's assets.
Reorganizing with Liberty Associates, which also recently became majority shareholder of Donzi Marine and Pro-Line Boats, will allow company founder Reggie Fountain to remain head of the company he started 30 years ago. FB Investments was unwilling to make that commitment, according to court papers.
Fountain Powerboat Industries, along with subsidiaries Baja by Fountain, Fountain Dealers' Factory Superstore and Fountain Powerboats, filed Aug. 24 for Chapter 11 bankruptcy protection in the Eastern District of North Carolina. At the time of the filing, it asked the court for permission to sell "substantially all" of its assets. The sale, it estimated, could bring in between $6 million and $8 million.
The judge, in his Oct. 9 ruling, said Fountain must now make monthly payments of $29,375 to pay off the $19 million note FB Investments bought from Regions Bank for $6.75 million, according to published reports. FB Investments is a corporation formed by the principals of California-based Oxford Investment Group for the purpose of acquiring the Regions Bank note on Fountain.
In filings to stop the sale, Fountain said, "The debtors do not support confirmation of the sale to FB Investments, as the debtors believe, exercising their reasonable business judgment, that the proposed financing and plan supported by Liberty Associates L.C. would provide a greater benefit to creditors, and any sale pursuant to the bid by FB Investments would not be in the best interest of the estate. ... Section 7(c) of the sale procedures permits debtors to reject, at any time before the entry of an order ... any bid that in the debtors' sole discretion is contrary to the best interests of the debtors."
In its talks with Reggie Fountain, FB said, it told him of its plans to "utilize debtors' business as a platform to develop a broad-based, branded boatbuilding business headquartered in Washington, N.C., with growing local employment utilizing local resources," according to court documents. "FB Investments had serious conversations with Mr. Fountain about coming to work for the new company to realize these ambitious plans but was not willing to offer him the position of CEO."
It was then, FB said in its court documents, that Fountain told the group he did not want to work with them, and days later he filed papers to stop the sale. Neither Reggie Fountain, nor representatives of FB Investments, could be reached for comment.
Fountain's financial difficulties had been documented before the company filed for Chapter 11. In February, Fountain started trading on Pink Sheets after being notified its stock would be suspended from trading on NYSE Alternext US, successor to the American Stock Exchange. It has since been suspended from trading on Pink Sheets because of the bankruptcy filing. In June, it announced it had retained investment banker Jacobs Capital to help find a partner to provide additional capital to get through the downturn and finance future growth.
This article orginally appeared in the November 2009 issue.