|Camping World Inc. President and CEO Marcus Lemonis says the deal that his 90-store Chicago-based RV rolling stock chain has been trying to put together to acquire troubled Southern California dealer McMahonâ€™s RV â€” once one of the stateâ€™s leading RV retailers â€” is being jeopardized because of escalating costs that have surfaced since Camping World agreed in principle to buy the store.
â€œWe signed a letter of intent about 10 days ago on a McMahonâ€™s transaction and, unfortunately, weâ€™ve put about $5 million dollars in cash on the table to help satisfy the liabilities that exist there â€” everything you can think of, including out of trust, trade payoffs, sales tax, employee wages, customer deposits, customer warranties, and we thought that was going to be sufficient,â€ Lemonis told RVBUSINESS.com.
â€œBut two things are happening. One, weâ€™ve been asked to put more money on the table and, No. 2, the hole that we thought existed is significantly larger than we originally thought. I mean, millions larger,â€ said Lemonis with regard to the Westminster, Calif.-based retailer. â€œAnd, you know, my primary goal is that the employees and customers get taken care of. And weâ€™re trying to figure out a way to do it and itâ€™s not looking good because the hole â€” the amount of money it will take to really clean everything up â€” is so big. Itâ€™s north of $8.5 million.
â€œThat just doesnâ€™t work for us,â€ added Lemonis, who continues to work with the landlords and manufacturers to close the transaction. â€œYou know, youâ€™re buying into something thatâ€™s already in really bad shape.â€
As previously reported, GE Commercial Distribution Finance (GECDF) filed suit in early April against McMahonâ€™s seeking a restraining order, claiming the retailer has an â€œout-of-trustâ€ balance of just over $3.56 million. The alleged â€œdefaultâ€ stems from the closure of its outlet in Mesa, Ariz., and the subsequent distribution and sale of inventory at other McMahonâ€™s RV sites.
Lemonis said he figured the $5 million would cover the employees and customers in the planned acquisition, which would have involved leasing McMahonâ€™s real estate as part of a â€œstrategicâ€ move for Camping World.
But he says Camping World, which is working on â€œsix other acquisitions in other markets as well as building seven stores right now,â€ was unaware of the hidden costs it is now confronting with regard to the SoCal dealership â€” one of the larger RV rolling stock stores to have survived the recession.
Now, he added, it looks like $8.5 million would have to be spent before Camping World would consider putting â€œa lick of inventory on the ground.â€
Making matters worse, he noted, is the fact that the situation is snowballing.
â€œAs I sit here today, my primary concern is employees who have not been paid and the customers, a lot of whom are calling just all hosed up,â€ said Lemonis. â€œI mean, theyâ€™ve given deposit money. Their trades arenâ€™t paid off. We have employees going to our stores looking for paychecks and, you know, we donâ€™t own the business. We just signed a letter of intent to try to fill this hole, but the hole is so big I donâ€™t know if itâ€™s possible.â€
A court date in the lawsuit, filed in the Central California U.S. District Court, is set for May 7 to determine â€œwhy the court should not grant GECDF a preliminary injunctionâ€ prohibiting McMahonâ€™s fromÂ â€œfurther disposing of GECDFâ€™s collateral.â€