Coburg, Ore.-based Monaco Coach Corp. has submitted a bare-bones budget to a bankruptcy judge, outlining what it figures it needs to spend in the short term in order to continue operating and maintain the value of its assets while it tries to sell all or part of its business.
The Register-Guard, Eugene, reported that in a series of motions filed Sunday (March 8) in U.S. Bankruptcy Court in Delaware, Monaco’s chief financial officer, Martin Daley, explained the company’s current financial state, how it got there, and what it needs to operate the business with “minimal disruption.” A hearing on the motions is scheduled today in Wilmington, Del.
Monaco filed for Chapter 11 bankruptcy on Thursday. On March 2, it terminated about 2,000 employees in Oregon and Indiana, most of whom had been on furlough since mid-December. The company said it has been hurt by the decline in financial and real estate markets, the erosion of consumer wealth and confidence, and tight credit.
In the filing, Daley lists assets that include a $7 million federal tax refund, which it received the same day it filed for bankruptcy, $108.9 million worth of inventory, and $6.7 million in accounts receivable, from sales that have been made but not yet paid. The company owes $36.8 million on a revolving loan fund and $36 million on a fixed-term loan, both of which were obtained last November.
A big potential liability is represented by the value of coaches the company shipped to dealers, and which Monaco could be required to buy back if a dealer went out of business or defaulted on a loan. The value of those repurchase obligations is $394.7 million, the company estimated.
Monaco said it had negotiated “forbearance agreements” with lenders, who agreed to withdraw existing re-purchasing demands and stop making new ones until April 6.
In its filings, Monaco laid out a tentative budget for the next 12 weeks, in which it estimates it will spend $20.4 million and collect $65.4 million.
The Register-Guard reported that to get through those next three months, Monaco asked the judge to:
• Allow it to re-establish an incentive program for dealers and their sales representatives so they can sell Monaco’s existing inventory. Daley estimates the company owes sales personnel about $130,000, and estimates it will need to spend about $65,000 a week going forward. In addition, dealers would receive an incentive payment against warranty claims that have accrued, limited to 5 percent of the price of a coach.
Daley said the incentive program was “essential” for Monaco because it will make it easier to sell existing inventory and encourage dealers to buy new coaches.
• Authorize, but not require, Monaco to continue paying employee wages and benefits while the company is in bankruptcy. Daley said the company now has 220 employees on payroll. He estimated back wages and benefits total about $450,000, and the company’s total weekly payroll is about $300,000. In addition, Daley asked the court to allow Monaco to continue paying reimbursable business expenses, life insurance and other benefits.
“The decline in employee morale that often accompanies a bankruptcy filing … would be compounded by (the company’s) failure to provide their employees with the fundamental benefits of employment,” Daley wrote.
Some employees said over the weekend that they were unable to cash their final paychecks. Monaco spokesman Craig Wanichek said Monday that the bankruptcy filing put a stay, or hold, on the company’s funds. “We have requested that all the necessary funds be released by the bank, and the court, to pay our employees.”
• Allow it to hire “certain professionals,” such as lawyers, accountants and consultants, as needed, in connection with Monaco’s ongoing business operations.
• Prohibit utilities, including telephone, gas, electricity, Web providers and others, from stopping service to the company. Monaco said it spends about $461,000 a month on utilities, and it proposed making a “utility deposit” equal to about half that amount.
• Authorize it to pay sales and use taxes, totaling about $100,000, and regulatory fees, estimated at $30,000.
• Authorize it to use cash collected from the sales of assets, such as RVs, while the company is in bankruptcy to keep the company operating. Monaco would provide protection to lenders who also have an interest in this cash collateral.
If Monaco was unable to use cash collateral, the value of Monaco’s assets “would decline immediately and dramatically,” Daley wrote.
“The use of cash collateral will provide (Monaco) with the funds with which to sustain operations, including to pay their employees and other expenses, including professional fees and expenses … and to maximize the value of their estates for the benefit of its creditors,” Daley wrote.
The Register-Guard reported that before filing for bankruptcy, Monaco engaged in “extensive discussions” with lenders on possible financing alternatives that would support scaled-down operations and a reduced labor force while the company pursued one or more potential sales and provided incentives to dealers, Daley said. But the parties were unable to come to terms.
But after Monaco filed for bankruptcy, lenders Bank of America and Ableco agreed on an interim order to “prevent the immediate and irreparable harm that would occur if (Monaco) did not have access to cash pending further negotiations to finalize either financing or final cash collateral use terms.”