On the heels of issuing its fiscal 2005 fourth quarter and year-end earnings report, Fleetwood Enterprises Inc. announced today (July 7) that it has reached a definitive agreement with two retail subsidiaries of Clayton Homes Inc. to sell the majority of the operating assets of Fleetwood Retail Corp. (FRC), the company’s manufactured housing retail company.
The sale price of $74 million includes the inventory, fixed assets, and prepaid rent at selected Fleetwood-operated stores. The Riverside, Calif. builder, however, will continue its manufacturing operations in the industry.
Fleetwood said it will retain ownership of 22 stores sublet to an independent dealer and a handful of previously closed stores, as well as various other assets with an estimated fair market value of $41.7 million.
In connection with the anticipated sale of FRC, Fleetwood has recorded asset impairment charges of $50.8 million in the fourth quarter.
“Clayton Homes is an industry leader that will be a force in manufactured housing for years to come,” said Elden Smith, president and CEO of Fleetwood Enterprises. “They are a well capitalized company with a quality management team. Clayton is also a good customer of Fleetwood and will be an ongoing partner as they continue to buy Fleetwood products for former FRC locations.”
Upon closure of the transaction, which is presently projected to be early in Fleetwood’s second fiscal quarter of 2006, the company will pay off its retail flooring facilities and FRC’s portion of the secured credit facility. As of fiscal year end, these debts totaled approximately $80 million.
Fleetwood is also selling the retail loan portfolio of its manufactured housing finance company, HomeOne Credit Corp. The company has entered into a non-binding letter of intent with Vanderbilt Mortgage, an affiliate of Clayton Homes.
It is currently anticipated that the closing of the sale will occur during the first quarter of fiscal 2006. Management expects that the portfolio will sell close to its carrying value, which was $70.9 million as of April 24, 2005. Upon the sale of that asset, the company will pay off the warehouse line of credit, which was $40.7 million at the end of the fiscal year.