The majority owner of Junction City, Ore.-based Country Coach LLC, acting as a creditor to the company, has filed a petition to force the financially ailing RV maker into involuntary bankruptcy.
The Register-Guard, Eugene, reported that the action is intended to fend off aggressive efforts by creditor Wells Fargo to seize assets from the company to pay off a loan balance of $8 million.
Wells Fargo sued Country Coach Jan. 28, saying it intends to repossess and liquidate collateral pledged by Country Coach against the loan, made in 2007 and now in default.
Bryant Riley, who led a group of investors that bought Country Coach in 2007 for $38 million, filed the petition for involuntary bankruptcy under Chapter 11 of the bankruptcy code late Friday (Feb. 6) afternoon. Under Chapter 11, a company can stay in business while it reorganizes its debts.
“What ended up happening is that Wells Fargo decided they were ready to move on,” Riley, a Los Angeles investment banker, said Sunday. “They were the senior lender so they wanted to get the collateral back.
“Our thought was this was a better resolution if we were in Chapter 11. This will hopefully enable us to figure out a better way for all creditors, and not just Wells Fargo, and hopefully keep Country Coach alive.”
According to the Register-Guard, the reason Riley filed for involuntary bankruptcy is that the company wasn’t yet prepared to file for a conventional Chapter 11 bankruptcy, he said.
“You need your lender to work with you a little bit,” he said, but Wells Fargo wasn’t interested and “forced our hand.”
He also said his investor group has put about $14 million into the company since 1997.
“We are a big creditor,” he said.
In the filing, he said Country Coach owes two of his companies, Riley Investment Management and B. Riley & Co., a total of $780,225. A third company listed in the petition, Fluid Connector Products Inc., of Portland, is owed $187,118. Fluid Connector Products supplies hydraulic and pneumatic parts and apparently is a supplier to Country Coach. A company official could not be reached for comment Sunday night.
Under bankruptcy law, if a company has more than 12 creditors, at least three creditors are needed to file for involuntary bankruptcy.
Jay Howard, Country Coach’s CEO, said in an interview Sunday that Riley’s action is intended “to get time to salvage the company as an ongoing operation and stop the bank’s activities, and to buy the time to get the investors together to allow us to continue.”
Riley’s action was forced by Wells Fargo’s bid to seize Country Coach’s collateral, Howard said. That collateral includes almost everything that isn’t real estate, including cash, motor coaches, machinery and contract rights.
“We’re still amazed by the bank’s actions at this point,” Howard said.
Country Coach now has 20 days to file an objection to Riley’s filing. If no objection is filed, the bankruptcy proceeds.
The Register-Guard reported that Wells Fargo could contest the filing. A lawyer for Wells Fargo could not be reached for comment Sunday night.
Country Coach’s factory has been shut down since early December, putting about 500 employees out of work. On New Year’s Eve, Howard notified employees the company would close for good by the end of February unless it was able to obtain new financing.
Like other RV makers, Country Coach has been battered by the recession, tight credit and poor consumer confidence.
Howard and Riley said they’re still working to keep Country Coach alive and save jobs.
“The business, the brand, the group of owners they have is a valuable commodity to a buyer or to us,” Riley said.
The bankruptcy filing gives Country Coach “a bit of time to react and try to get themselves in a spot where they will be able to get some capital,” he said.
Howard said Sunday that three different companies interested in investing or buying the company filed proposals by Friday’s deadline, but he said it would “take time” to sort through them. “They all take due diligence,” he said.
As for the company’s fate, Howard said, “It’s not over. It’s an ongoing battle.”