MRRA's efforts to form a committee to help dealers through the reorganization anger Jacobs
It's a confusing time for Genmar dealers. As the parent company works through the bankruptcy process, some are wondering if the brands they sell will be part of Genmar when it emerges from Chapter 11, while others question when they will see warranty payments.
If they sell a boat now, does Genmar have the ability to build it if it's not in stock? Are replacement parts available for existing customers? And should they pay $1,000 each to join a committee of Genmar dealers being formed by the Marine Retailers Association of America to have their interests represented in bankruptcy court?
"We've had an inordinate amount of calls from Genmar dealers in almost a panic mode, not knowing what to do," says MRAA president Phil Keeter. "Most dealers don't have the wherewithal to hire an attorney to represent them in that at all, and being unsecured creditors they're going to be way down on the list."
During a recent webinar, attorneys told Genmar dealers they deserve a "seat at the table" during the company's Chapter 11 reorganization and urged them not to become "sitting ducks" during the proceedings.
The MRAA is working with New York-based lawyers Leonard Bellavia of Bellavia Gentile & Associates and Eric Snyder of Siller Wilk, who would represent the committee. Both men also were involved in representing auto dealers in the Chrysler and General Motors bankruptcies.
"What you don't want to do is wait until something happens and then try and get legal representation," Bellavia says. "We're on call to examine the court docket on an hourly basis to see what's happening, whether any activity is taking place that potentially impacts the dealers, and respond quickly."
Bellavia says a motion or objection filed by a committee of several hundred creditors is "accorded great weight by the courts and affords the committee to the right to play a dominant role in all court proceedings." Around 150 to 200 dealers would be needed for such a committee, he says. Genmar says it has about 1,100 dealers worldwide for its 15 boat brands.
Anonymity a concern
Genmar chairman Irwin Jacobs has come out strongly against the need for a dealer committee. "I've worked my whole life to take care of my dealers, not to destroy them," he says. "It's the most insulting, obnoxious thing I've ever seen or heard in my life."
Anonymity was among the main concerns of the 80 or so dealers participating in the webinar. They don't want their names, or the names of their dealerships, publicly known for fear of retribution. Snyder says he would request anonymity for committee members, and while there are "no slam dunks" in legal proceedings, it helps to be able to show a judge if there is evidence of coercion.
"We have some information showing coercion by Genmar," Snyder says, noting that coercion can range from a Genmar executive simply asking a dealer if he planned to join the committee to an out-and-out threat against any dealer who does join.
Jacobs says these claims are "absolutely ridiculous."
"I have no intention of reprimanding or causing any dealers any hardship," he says. "I know nothing about [coercion] whatsoever, and if I find out anybody in our company has done anything to any dealers, I will personally fire them."
Snyder says he could file the request for anonymity on behalf of the MRAA and any dealer willing to be named and, if it's granted, others could join in at that point. "The more that come forward now, the better, but if it's just the MRAA, so be it," he says.
One Genmar dealer contacted by Soundings Trade Only, who asked not to be identified, says if the committee members are guaranteed anonymity during the court proceedings, he'll likely join "just for the heck of it." However, he says, as a dealer who is in good standing with Genmar and in all likelihood will remain a Genmar dealer, he's not sure what joining the committee would do for him.
His main concern for now is getting warranties paid, but the attorneys stressed they don't represent individuals, only the group. A bankruptcy court judge weeks ago approved a request by Genmar to allow its boat companies to honor appropriate past and ongoing warranty and rebate claims, but this dealer says he is still waiting for payments. Also, the dealer says, if during the reorganization process Genmar sells or discontinues one or more of its 15 brands, the committee can't do anything about that.
"I don't know if [the committee] will happen," he says. "It's a tough situation."
Snyder says only dealers who are part of the committee will be represented on behalf of the group. Any rulings will affect only them, not all Genmar dealers. "The committee helps because it's there," he says. "People know it's a deterrent."
A 'ruthless process'
Bellavia says Genmar dealers would present the same issues as Chrysler and GM dealers. "If the rejected dealers in Chrysler did not have a committee, they would be sitting with unsold vehicles, which would have fetched 50 to 60 cents on the dollar," he says. "Warranties would not have been honored. In GM, every dealer - rejected or continuing - would have all the state dealer statutes eliminated if it weren't for collective action.
"It is highly likely Genmar is moving slowly in seeking to limit its obligations to dealers in a calculated attempt to lull them into a false sense of security so they don't seek representation, only to lower the boom when it's too late for dealers to hire counsel and defend themselves," Bellavia adds. "Bankruptcy is a ruthless process, and surprise motions with very little time to respond is commonplace."
Jacobs has rejected any comparisons between Genmar and the automakers, saying he is sending out warranty checks and that dealer agreements are going out in a timely fashion. "We have no intention of being anything like Chrysler or GM," he says. As of mid-July there were no documents in the court files pertaining to termination of dealer agreements.
Bellavia notes that the point of Chapter 11 is to reorganize and "start with a clean slate" with vendors, dealers and other entities. Why Jacobs would leave one group, such as dealers, "completely intact kind of belies the history of bankruptcy reorganization," he says.
In other developments
- Genmar's request to continue existing promotional programs for Ranger Boats, the company's Flippin, Ark.-based subsidiary, was approved by the court. Both the Unsecured Creditors Committee and Textron Financial Corp. had filed objections to Genmar's request to allow the promotions to be paid, noting they total nearly $1 million. This includes payment of certain pre-petition promotional claims, such as $500,000 in prize boat certificates for the FLW series of fishing tournaments.
"As of the filing date, Ranger Boats had the highest market share in its segment. The Ranger brand has developed a very loyal following in the recreational and professional fishing circles," according to court documents filed by Genmar. "The debtors view the Ranger brand as a very valuable asset but one that needs to continue to be promoted in order to preserve and maintain its value."
In its request, Genmar says it has "sufficient amounts available in their budget with Wells Fargo Bank, National Association, Fifth Third Bank and GE Commercial Distribution Finance to pay the prepetition promotional costs."
- Genmar can pay up to 15 midlevel managers a total of $400,000 as part of a retention program, according to a court ruling. Genmar, in court filings, says the program is crucial to ensure a smooth execution of the 22-company reorganization and prepare for emergence from Chapter 11.
The Unsecured Creditors Committee had filed an objection, saying the program is not necessary to ensure these individuals will continue to work for Genmar. In court documents, the committee says: "During this economic downturn, the midlevel managers of Genmar Holdings ... will have few, if any, alternatives to working at Genmar Holdings Inc."
The program is described as targeting up to 15 midlevel managers and would issue payments between $4,000 and $40,000, depending on the base salary of the participant.
- The Unsecured Creditors Committee has created a Web site to keep interested parties up to date on Genmar's Chapter 11. It can be viewed at www.genmarucc.spaces.live.com. Gary Potter of EZ Loader Boat Trailers was elected chairman of the committee and Marcia Kull of Volvo Penta of the Americas was elected vice chairwoman.
Claim forms are now available for unsecured creditors, the Unsecured Creditors Committee reports on the site. The site includes a link to the bankruptcy proof-of-claim form and a link to the bankruptcy case captions for Genmar and its affiliates.
Completed proofs of claim should be mailed to Clerk of Court, U.S. Bankruptcy Court, 301 U.S. Courthouse, 300 South Fourth St., Minneapolis, MN 55415. Each creditor is advised to consult with legal counsel of its choice before filing a proof of claim, the committee says on the site.
This article originally appeared in the August 2009 issue.