The company resumes work on four models after prolonged and complex bankruptcy proceedings
Baja Marine has resumed boatbuilding operations at its Washington, N.C., plant after a complicated court battle and two Chapter 11 bankruptcy filings in three years.
In mid-August, the company began building the 247 Islander, 26 Outlaw, 278 Performance and 30 Outlaw models, and it plans to add the 277 Islander and 35 Outlaw models for 2013, Baja CEO Johnny Walker said in a statement.
In October 2011, First Capital sought $61.04 million in damages from Fountain Powerboats and other entities, including Baja Marine, for breach of loan agreements, according to documents filed in a North Carolina court. The “borrower defendants” also include American Marine Holdings LLC, Donzi Marine LLC, AMH Government Services LLC, Pro-Line Boats LLC, Fountain Powerboats LLC, Fountain Powerboat Industries LLC, Fountain Powerboats Inc., Fountain Dealers’ Factory Super Store Inc., Palmetto Park Financial LLC, 50509 Marine LLC, Liberty Acquisition FPB LLC, and Joseph G. Wortley.
After Fountain initially filed for bankruptcy protection in 2009, Liberty Associates and Fountain filed a joint reorganization plan, and Liberty acquired the company. Reggie Fountain was at first retained as chief executive, but he parted ways with the new owners at the end of 2010. He subsequently sued the company over money he says he was owed and alleged improper business dealings by Liberty CEO Bill Gates and other company executives.
Fountain Powerboats filed counterclaims against Reggie Fountain, alleging that he took company property, as well as trade secrets, when he left. Fountain has repeatedly denied those allegations, asserting that there are no trade secrets at Fountain.
Fountain Powerboats, along with numerous other affiliated parties, filed Chapter 11 papers Jan. 18 for the second time in less than three years. The filing was recorded with the bankruptcy court in the Southern District of Florida in West Palm Beach, where a federal judge threw it out and sent it back to the North Carolina courts.
In the second Chapter 11 filing, Fountain listed more than $53 million in liabilities and less than $50,000 in assets, according to court documents. A total of $53.6 million was owed to lender First Capital, according to the filing.
“A receiver was appointed last winter and did put Baja into bankruptcy,” Walker says in his statement. “However, the court dismissed it as an improper filing. The bankruptcy court judge ruled that the receiver did not have the authority to put Baja in bankruptcy. It’s a complicated process, but Baja has gone back to its former ownership.”
Baja Marine went back to the people at Liberty, Walker says. “While Baja currently has no affiliation with the former sister brands, we are in discussion to work with those brands in the near future,” Walker says. “We hope to have more to say about that in the months to come.”
For now, Baja is financially strong enough and has adequate working capital, Walker maintains. “We’re in it for the long haul,” he says. “Even if the market takes another dip, Baja has the financial resources to weather it.”
The builder lost staff when it shut down operations, Walker says, but has been able to rehire a “small number” of them to fit the company’s needs. “I personally have worked in production in the marine industry for more than 30 years and have worked in management since 1986,” Walker says. “We also are fortunate that Craig Barrie, who has a long and storied history in the recreational marine industry and performance boat segment, has remained with Baja as vice president of sales and marketing.”
Overall, the Baja management team averages 25 or more years in the marine industry, and many have been with Baja for several years, Walker says. Plant workers average 12 years or more of boatbuilding experience. “There are a lot of people here in Washington, N.C., who want to come back once production picks up, and we hope to be able to do that in the not-too-distant future,” Walker says. In the meantime, Baja will continue to market itself as a family-friendly performance boat, he adds.
“In terms of marketing strategy, our goal is to sign the best dealers in the country,” Walker says. “We’ve started out with very recognized dealers who specialize in the performance market. We’ve totally revamped our website. We’re also planning to have a presence at many of the fall boat shows, including the Fort Lauderdale International Boat Show.”
Baja’s challenges are exacerbated by the fact that the high-performance sector was particularly hard-hit during the recession, Walker says. Still, he thinks a strong market remains because of the brand’s loyal following. “We’ll be patient,” he says. “We’ll let our dealers stock the units that fit their needs because we understand that they are reluctant to stock too much inventory. Our plan is to move forward and grow by satisfying boaters and dealers one boat at a time.”
To date, Baja has signed 12 dealers in North America and is talking to distributors in Europe and Asia, including the Middle East, Walker says. “Right now, we primarily are interested in signing Baja dealers who had the line in the past and were successful,” vice president of sales and marketing Craig Barrie says in the statement. “We are looking for their expertise in service, as well as their experienced sales staff, quality showrooms and their ability to grow the line to its full potential.”
“We don’t sell factory-direct, but we do put our end-user customers in touch with the dealer in their market to help them get into the boat they want and ensure they have somewhere to go for regular maintenance and service,” Walker says. “The dealers we’ve signed thus far are very strong in the performance boat market, so they are the right people to work with the customer.”
Baja is standing behind warranties on boats built after the brand relaunched in 2011 and prior to the shutdown, Walker says. “We are absolutely standing behind the warranty on boats that were built and sold in model year 2012,” he says. “Those boats left here with a full factory warranty, and we will support that, just as we do for any boat that leaves our factory today.”
After several months embroiled in legal battles with creditors and two Chapter 11 filings in three years, a temporary receivership of Fountain Powerboats and its affiliates, which include Baja, was dissolved by a North Carolina judge in May. A sealed mediation settlement between Fountain and lender First Capital was filed in the Superior Court division of North Carolina Business Court, also in May. Receiver Ronald Glass was ordered to transfer custody and control of Fountain’s assets to First Capital.
Fountain and 12 other defendants, including Baja, agreed to provide a good faith commitment by Aug. 15 from a financial institution or lender to make an undisclosed cash payment required under the sealed agreement, according to court documents. The good faith commitment was to be made to Liberty Marine Holdings LLC, the investor that bought Fountain out of its first Chapter 11 restructuring in 2009. The cash payment is to be made on or before Oct. 14, and proceeds from the sale of Palmetto Boats or WIP Boats were also to be remitted to First Capital.
This article originally appeared in the October 2012 issue.