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Responding to the lawsuit filed Jan. 28 by Wells Fargo Bank, lawyers for Junction City, Ore.-based motorhome builder Country Coach Inc. filed documents Monday (Feb. 2) stating the company would not oppose the appointment of a receiver to protect company assets provided the receiver was acting as an officer of the court and not as a “unilateral agent” for Wells Fargo, and provided the receiver was not given authority to dispose of company assets.
The Register-Guard, Eugene, reported that the company also said it has hired a Los Angeles investment bank, FocalPoint Partners, to help it find financing.
“Country Coach has done nothing wrong, other than being financially stressed,” the company’s lawyers said.
FocalPoint’s managing director, Alexander Stevenson, said in a court filing that 21 potential investors have signed nondisclosure agreements and received information describing Country Coach’s business and strategies. Those parties have until Friday to submit nonbinding proposals to providing financing, invest in, or acquire the assets of Country Coach, he said.
The company also said it has contacted two national liquidation firms to assess the value of its collateral.
According to Wells Fargo’s suit, the bank gave Country Coach a $25 million revolving loan fund on May 18, 2007, which was three months after a group of investors led by Los Angeles investment banker Bryant Riley bought the company from National RV Holdings Inc. and took it private.
As part of that agreement, Country Coach granted Wells Fargo a security interest in all its patents and trademarks, and Wells Fargo obtained a first-priority security status in most of Country Coach’s personal property assets. That would encompass everything that isn’t real property, and includes completed motorcoaches, works in progress, raw materials, contract rights, accounts receivable and factory machinery.
The Register-Guard reported that on Nov. 3, Wells Fargo notified Country Coach that it was in default on its loan, the suit states. Wells Fargo said it then gave Country Coach “ample time” to find alternative funding sources, but none were found.
Wells Fargo said it wants a federal judge to appoint a receiver to take possession of Country Coach’s collateral because of numerous events during the past month and a half:
On Dec. 18, Country Coach settled a lawsuit it filed against fiberglass manufacturer Owens Corning Fabwel and received about $760,000. But the company did not disclose the settlement to Wells Fargo, and instead spent more than $500,000 without the bank’s knowledge and consent. When Wells Fargo learned of the settlement and demanded immediate payment, Country Coach finally paid what was left of the money: $7,000.
Country Coach said it used the proceeds from the Owens Corning lawsuit for various business expenses, including payroll and related taxes, health insurance and other benefits for December, workers’ compensation insurance, catching up on its lease payments and paying FocalPoint.
On Dec. 19, a judge in Tarrant County, Texas, garnisheed Country Coach’s operating bank account in the amount of $497,611 for the collection of a judgment sought by Southern Holdings LLC.
Country Coach said it reported the garnishment in a timely manner to Wells Fargo. It should have no effect on Wells Fargo because of the bank’s superior lien rights, the company said.
After Lee Joint Ventures — a company controlled by Country Coach founder Bob Lee, his wife, Terry, and his brother, Ronald — filed an eviction lawsuit against Country Coach on Dec. 22, Wells Fargo was forced to make a $400,000 advance to the Lee company to reinstate Country Coach’s lease. The Lees own about half the factory complex occupied by Country Coach.
The Register-Guard reported that on Jan. 23, Lee Joint Ventures notified Wells Fargo that Country Coach had failed to pay some of its utility bills and that its gas and electricity had been shut off as a result. That forced Wells Fargo to provide another $150,000 under the loan agreement to get the utilities re-instated.
Country Coach said the defaults could have been avoided had Wells Fargo permitted the company to borrow money from the revolving loan fund.
On Jan. 21, Wells Fargo learned that Country Coach had reached agreement to sell two motor coaches for a total of $795,000. Wells Fargo said it demanded Country Coach turn over the proceeds from the sales but the company has refused to do so.
Country Coach said it has set aside the proceeds from the sale of two motor coaches, and will deliver them to a court-appointed receiver, and noted that Riley Investment Management, the company’s majority owner, also is making a claim for the money.
Wells Fargo said Country Coach owes $7.07 million in outstanding principal and interest; $889,423 in letter of credit obligations; $32,000 in merchant credit card obligations; plus unspecified interest, fees, expenses and credit card charges.