Following the dismissal of its Chapter 11 bankruptcy petitions in Florida, the receiver for Fountain and related entities filed a motion in North Carolina asking a judge to confirm its authority to file such petitions on behalf of the boatbuilder.
Ronald Glass, and the firm of GlassRatner Advisory & Capital Group, were appointed the corporate receiver in First Capital’s case against Fountain on Oct. 20, and this latest filing recounts what led up to the Chapter 11 bankruptcy petition, which was filed in January.
First Capital is seeking $61.04 million in damages from Fountain and other entities for the "borrower defendants' " breach of loan agreements, according to documents filed in the North Carolina court.
The “borrower defendants” 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.; Baja Marine Inc.; Palmetto Park Financial LLC; 50509 Marine LLC; Liberty Acquisition FPB LLC; and Joseph G. Wortley.
In the latest filing, Glass noted that before filing for Chapter 11 in Florida he asked the North Carolina court for authority to sell 11 boats in the Palmetto Park inventory for $429,000, and the funds of the sale would generate capital to assist with continuing operations. Palmetto Park, according to court documents, is an entity created and funded by FCC to provide dealers with floorplan financing.
On Jan. 16, Wortley, a principal of the borrower defendants, filed a Chapter 11 petition “purportedly” on behalf of Palmetto Park, which “halted the receiver’s proposed sale of 11 boats and the planned construction of new boats. …The inability to proceed with the sale and to manufacture additional boats dramatically impacted cash flow.
“In response to Wortley’s bankruptcy filing, FCC informed the receiver that it was unlikely to continue funding any of the borrower defendants unless they also filed bankruptcy,” according to Glass’ latest filings.
“Lacking prospects of further funding from FCC or revenue from the proposed sale of boats, the receiver determined that Chapter 11 bankruptcy filings afforded the borrower defendants the best opportunity to restructure their debts and otherwise reorganize on a going forward basis,” he added.
The filing, he said, would reduce operating expenses by enjoining the collection of pre-bankruptcy debts, which are currently in excess of $3 million, increase the likelihood of “debtor-in-possession” financing from FCC and allow for the restructuring of loan obligations.
He noted that the judge in Florida dismissed the Chapter 11 petitions without prejudice, meaning petitions can be refilled. Wortley filed a motion to dismiss the case, saying Glass did not have the authority to file for Chapter 11.
Following the dismissal, an attorney for Fountain Powerboats Inc. and Baja Marine Inc. filed a motion in North Carolina to dissolve the temporary receivership. To date, no order has been filed on that motion.