Gunboat awaits Chapter 11 auction

Nobody can sell a Gunboat like founder Peter Johnstone.
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Nobody can sell a Gunboat like founder Peter Johnstone.

That’s the view of Johnstone, who stepped down as president as the company prepares to be sold after entering Chapter 11 restructuring. So he is serving as a brokerage agent for the brand.

North Carolina-based Gunboat International Ltd. will be sold at auction as a single lot to bidders. Barry Carroll, who was chief operating officer, has been named the new president. Papers filed in U.S. Bankruptcy Court in the Eastern District of North Carolina requested compensation throughout the process for Carroll in his new role.

“The Gunboat family owes a debt of gratitude to Peter,” Carroll says. “Without his creative flair, knowledge and energy, Gunboat would not exist.”

The company confirmed that Gunboat continues to employ 60 people and is constructing six boats. A custom Gunboat 78 is nearing completion and five carbon fiber Gunboat 55 sailing cats are in the process.

“Work continues and no reduction to the boatbuilding team is anticipated,” the company says. The company was seeking a stalking horse bidder — a viable bidder designated to deter absurdly low offers. All bid packages need to be received by the company and the court by March 29.

Gunboat filed for Chapter 11 restructuring in November, with Johnstone citing a “perfect storm of adverse business circumstances, mistakes and disputes.” Johnstone was later upbeat about the situation, telling Trade Only at the time that the company was poised to rebound.

A list of the largest 20 creditors amounted to roughly $6,025,845 million in claims, although there were more than 100 claims in total. Company assets were listed at $1.1 million, and total liabilities were about $15.6 million, according to court documents.

Among Gunboat’s challenges was the legal dispute between the company and Hudson Yacht and Marine Industries, a Chinese builder Gunboat contracted to build the 60 and subsequently sued. Gunboat alleges HYM never did some work and that the yard refused to pay warranty claims on other poorly constructed yachts.

Gunboat also accuses HYM of breach of contract, fraudulent inducement, interference with contractual relations, unjust enrichment, breach of a non-compete agreement and misappropriation of trade secrets. Court documents accuse the company and its owner of launching a “knockoff brand” of carbon fiber catamarans despite signing a non-compete contract. The issues prompted Gunboat to spend thousands out of pocket to fix the problems, according to the complaint. HYM has denied the allegations, filed a countersuit and blames Gunboat for the problems.

Court documents also say there had been cost overruns. “The debtor began to experience financial problems as a result of cost overruns in the manufacture of its 55-foot series, with the costs for design and manufacture of the first yachts produced in this series exceeding the sale price for some of the yachts under construction,” documents say. “While later yachts in the 55-foot series were profitable, the debtor was unable to recoup sufficient proceeds from the later 55-foot yachts to offset the earlier 55-foot losses. This led to the termination of several contracts that were in various stages of production.”

Also on Johnstone’s list of troubles was a G4 capsize in April and a recent photo boat collision during a magazine boat test in Annapolis, which Johnstone says has “thwarted” sales of the series.

The third problem, he says, was the abandonment of the Gunboat 55 catamaran Rainmaker by her owner and crew after a dismasting in a squall 200 miles southeast of Cape Hatteras early last year. That was “certainly not helpful,” Johnstone says.

This article originally appeared in the March 2016 issue.

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