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Lawyers for Wells Fargo Bank told a federal magistrate Wednesday (Feb. 4) that the lender no longer trusts Country Coach, which is so broke that it is unable even to keep its lights on. As reported by the Register-Guard, power and heat at the company’s Junction City, Ore., plant were to be shut off today unless the landlord is paid $58,000.
Meanwhile, Prevost also filed suit Wednesday, seeking to recover four bus shells from the company worth about $2 million.
Wells Fargo lawyers asked Magistrate Thomas Coffin to give the bank authority to begin seizing collateral immediately from the motorhome maker, so it can sell the assets and start to recover some of the $8 million Country Coach owes on a loan balance.
“We are in immediate peril of our collateral being damaged,” David Kurzwell, an Atlanta attorney representing Wells Fargo, told Coffin during a two-hour hearing in U.S. District Court in Eugene. “We’ve lost trust in Country Coach.”
“The deterioration of Country Coach is alarming at this point,” said Wilson Muhlheim, a Eugene attorney for Wells Fargo.
Lawyers for Country Coach, as well as for other creditors, objected, asking the judge to appoint and supervise a receiver who would take possession of the company’s assets while the company continued to operate.
“A receiver is appropriate to protect the bank’s interest and other constituencies in the case,” said David Levant, attorney for Country Coach.
“Country Coach would ask that the court refuse to allow the bank to liquidate a company that itself believes can still survive,” he said.
Coffin, saying he wouldn’t “shoot from the hip,” told Wells Fargo’s lawyers to file a brief by the end of business today that spells out their arguments and specifies exactly what collateral they want to collect. Lawyers for Country Coach and other creditors have until Friday to respond, and Coffin said he may hold another hearing early next week.
The Register-Guard reported that Wells Fargo said Country Coach owes nearly $8 million on a $25 million revolving loan fund. Both sides agreed the RV manufacturer is in default on the loan.
Prevost, a Canadian manufacturer of bus chassis, said it provided Country Coach with four of its bus shells over the past year, valued at $500,000 each, but has never been paid. Under its business agreement with Prevost, Country Coach would normally convert the shells into luxury motor coaches and pay Prevost when it sold the coaches.
Country Coach’s plant has been idle since early December, leaving about 500 workers out of work.
On New Year’s Eve, the company notified employees the company would shut down for good by the end of February unless it was able to obtain additional financing.
Company officials are still holding out hope for survival. They’ve hired a Los Angeles investment bank to seek out investors, who have until Friday to submit nonbinding proposals to provide financing, invest in or acquire the assets of Country Coach.
Wednesday’s hearing began with Wells Fargo’s request that Coffin appoint a receiver to take possession and sell off collateral pledged to Wells Fargo.
But after Coffin indicated he was not comfortable appointing a receiver without judicial oversight of how the collateral would be liquidated, Wells Fargo lawyers said they no longer wanted a judge to appoint a receiver.
Instead, Muhlheim said the bank simply wanted the judge to enforce the terms of its loan agreement with Country Coach, which gives Wells Fargo the right to take possession of and liquidate the company’s personal property assets.
Those assets include almost everything that isn’t real property, such as completed motor coaches, works in progress, raw materials, contract rights, accounts receivable and factory machinery.
Courts have long recognized the rights of secured creditors to take possession and dispose of collateral under the Uniform Commercial Code, he said.
“There’s no reason for the court to intercept the exercise of these rights and remedies,” he said.
At one point, Coffin suggested that he appoint a receiver who would work for and be paid by Wells Fargo to take possession of Country Coach assets, with judicial oversight of any liquidation of assets. But bank lawyers declined the offer.
Country Coach’s proposal to appoint a receiver to oversee the liquidation of assets is the equivalent of a bankruptcy, and if that’s what the company wants, it should file for bankruptcy, Muhlheim said.
Coffin asked Lavant, “Why isn’t Country Coach in Chapter 11?” the section of the bankruptcy code that permits a company to reorganize under court supervision while getting some breathing room from creditors.
Filing for bankruptcy is expensive and cumbersome and the “second-worst option” after “uncontrolled liquidation,” he said.