Analysts: More bankruptcies to follow Genmar's

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Industry analysts say Genmar's announcement that it had filed for Chapter 11 bankruptcy this week could be a precursor to a difficult summer for the already hard-hit marine industry.

"Genmar's filing is likely to put additional pressure on the market in the near term and underscores our belief that the current '09 selling season will be the most difficult for the industry," said Tim Conder, an analyst with Wachovia Capital Markets.

"We expect dealer and, in turn, manufacturer bankruptcies will accelerate during the summer, as operators may not want to burn through any remaining financial resources — family wealth — on the hopes of making it through the season," he added.

Conder predicted that 2009 "will not only be the peak for the industry downcycle but also a multicycle peak in marine bankruptcies."

Analyst Hayley Wolff, with Rochdale Research, agreed, noting that the boats that are selling this summer are those that have been repossessed by floorplan lenders and are being sold at a discount.

"In addition, there are several boat companies with too much leverage and are at risk of defaulting on debt," she said. "This will likely put more inventory in the channel. As a result, we do not expect to see any real stabilization in the industry in 2009 and may have to look out 12 months before marine retailers place orders."

In assessing the impact Genmar's filing will have specifically on Brunswick, the country's largest boatbuilder, Wolff noted that Brunswick's engine business — Mercury Marine — has only a few million dollars of exposure, as Genmar has transitioned most of its boats to Yamaha and Volvo.

"Long term, Genmar's bankruptcy should result in further gravitation of the best industry dealers to the [Brunswick] fold," Conder predicted.

— Beth Rosenberg

b.rosenberg@tradeonlytoday.com

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