RVRESOLVE

May 2, 2009 by Bob Ashley from RVBusiness:

Monaco Coach Corp. got the green light Friday (May 1) to put its major assets up for auction later this month, but only after intensive negotiations that delayed the start of a hearing in U.S. Bankruptcy Court in Delaware.The Press-Enterprise, Eugene, Ore., reported that Robert Orgel, one of Monaco’s attorneys, told Judge Kevin Carey that Monaco was fortunate the hearing was scheduled late in the day because the extra time enabled the parties to resolve all the objections to Monaco’s auction plan.
“I couldn’t have told you that 45 seconds ago,” he said.
Monaco, a Coburg, Ore., RV maker, terminated about 2,000 employees and filed for Chapter 11 bankruptcy protection in early March, seeking to reorganize its finances while getting breathing room from creditors.
Before Friday’s hearing, lawyers for Monaco’s two main secured creditors, Bank of America and Ableco Finance, as well as for unsecured creditors and for the U.S. Trustee, had filed objections to Monaco’s plan to put its major assets up for auction, as well as its request to continue using cash from the main creditors.
Ableco had registered the most vociferous objections in a brief filed Thursday. Its lawyers argued that the proposed $52 million sales price would not come close to covering the $75 million that Monaco owes Ableco and Bank of America. Good faith negotiations to resolve issues had failed, they said, arguing that the company’s operations should be shut down and its assets liquidated.
The Press-Enterprise reported that after talks that apparently went on for most of the day Friday, the objections were resolved.
A subsidiary of Navistar International Corp. has agreed to buy Monaco’s assets for $52 million, but other parties will have a chance to submit bids at hearing scheduled for May 21.
Navistar is a massive Illinois corporation that builds diesel engines, school buses, heavy trucks and military vehicles.
Earlier this month, Monaco signed an asset purchase agreement in which a Navistar subsidiary called Workhorse International Holding Co. would buy Monaco’s major assets for $52 million.
Under such a deal, Navistar would acquire all of Monaco’s RV brand names, its closed factories in Coburg and Indiana, plus equipment and intellectual property. Navistar hasn’t disclosed its plans for the Coburg headquarters, but a Monaco official said in March that the new owner would restart the plant.
Monaco and Navistar have a long-running business relationship. In 2007, the two companies formed a joint venture to build rear-engine diesel chassis in Elkhart, Ind. And Navistar’s president and CEO, Daniel Ustian, has been on Monaco’s board since 2003.

From Greg Gerber of RVeNEWS

WILMINGTON, Del. -- Giant RV has filed a massive $12.8 million claim against Monaco Coach Corporation as part of Monaco's bankruptcy, RVeNEWS learned today.

The California RV dealership is seeking $442,000 in unpaid warranty claims, $565,448 in unpaid reorder incentives, $750,000 for potential exposure on Monaco products, $760,000 for damage to Giant RV's reputation and brand as a result of Monaco's bankruptcy and $10.8 million in anti-trust violation damages.

At the time of the filing, Giant said Monaco owed $300,000 in submitted warranty claims. "Monaco provided its customers with a one-year express product warranty," wrote Peter Kravitz, vice president of Giant RV, in the claim filed with the court. "Dealers such as Giant RV provide warranty service to customers and were entitled to reimbursement of warranty claims per terms of the dealer agreement and industry standards."

For each unit sold, Kravitz claimed Monaco reserved at least $2,000 to cover warranty claims. Because the bankruptcy filing put Monaco's warranty reimbursement program in doubt, Giant RV said it was left with the "very real potential exposure" on each of the 71 new units it sold within one year of March 6, the date Monaco filed bankruptcy.

The $565,448 for unpaid incentives resulted from what Giant RV claimed was currently owed incentive payments and co-op money available through Monaco's Franchise of the Future program. "These are funds that Monaco promised to Giant RV as a material inducement to purchase Monaco units," Kravitz wrote.

Kravitz also claimed there were several outstanding "Lemon Law" claims in California for which Monaco has a duty to defend and indemnify the dealership under their signed dealer agreement. One of the four claims already being adjudicated in California courts may exceed $500,000 alone.

The bankruptcy filing by Monaco has also damaged Giant RV's goodwill and brand, Kravitz wrote. The filing "will force Giant RV to incur substantial additional flooring charges as units age as the goodwill of the brand has been scarred and depreciated," he added.

To mitigate those damages, Giant RV is attempting to purchase extended service contracts for unsold Monaco units. Those contracts will cost roughly $1,500 per unit. "In addition, flooring for these units continues to accrue at approximately $70,000 per month," Kravitz wrote. "Giant RV estimates the total damages to Giant RV as a result of the bankruptcy filing will easily exceed $760,000."

The largest claim, $12.8 million for anti-trust violations, is due to action Monaco took to unload units at lower prices and at auctions which gave non-authorized Monaco dealers access to the same products Giant RV was authorized to carry.

"Based on Monaco's anticompetitive conduct, Giant RV filed a protest with the New Motor Vehicle Board. Giant RV discussed this conduct with Richard Bond, Monaco's general counsel, during which conversation Mr. Bond did not dispute any of the assertions or their implications," Kravitz wrote. "Rather, he indicated that Monaco was desperate to sell its finished goods and needed to take the actions to accomplish the goal. These damages exceed $10.8 million prior to trebling the damages as allowed by statute."

Vehicle Make / Model: Model Year(s):
GULF STREAM / PRAIRIE SCHOONER 2009
Manufacturer: GULF STREAM COACH, INC. Mfr's Report Date: APR 08, 2009
NHTSA CAMPAIGN ID Number: 09V135000 NHTSA Action Number: EQ09001
Component: EQUIPMENT:RECREATIONAL VEHICLE
Potential Number of Units Affected: 4
Summary:
ON CERTAIN FIFTH WHEEL TRAILERS EQUIPPED WITH SUBURBAN GLASS TOP, SEALED BURNER RANGES AND COOK TOPS, A THREADED CONNECTOR ON THE TUBE BETWEEN THE BURNER VALVE AND THE BURNER MAY NOT HAVE BEEN FULLY TIGHTENED DURING THE MANUFACTURING PROCESS.
Consequence:
IF THE THREADED CONNECTOR IS NOT PROPERLY TIGHTENED, IT IS POSSIBLE FOR THE GAS TO LEAK FROM THE CONNECTION WHEN THE BURNER IS TURNED ON. LP GAS IS HEAVIER THAN AIR AND ANY LEAKED GAS COULD ACCUMULATE IN AN ENCLOSED OR LOW AREA IN YOUR RECREATIONAL VEHICLE. A SUFFICIENT QUANTITY OF ACCUMULATED GAS, IF IGNITED, COULD CAUSE A FIRE OR EXPLOSION.
Remedy:
GULF STREAM IS WORKING WITH SUBURBAN TO REPAIR THESE COOKING APPLIANCES. OWNERS MAY CONTACT GULF STREAM AT 1-800-289-8787 OR SUBURBAN AT 423-775-2131.
Notes:
OWNERS MAY ALSO CONTACT THE NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION'S VEHICLE SAFETY HOTLINE AT 1-888-327-4236 (TTY 1-800-424-9153), OR GO TO HTTP://WWW.SAFERCAR.GOV .

Vehicle Make / Model: Model Year(s):
CROSSROADS / CROSS TERRAIN 2009
Manufacturer: CROSSROADS RV Mfr's Report Date: APR 16, 2009
NHTSA CAMPAIGN ID Number: 09V136000 NHTSA Action Number: N/A
Component: EXTERIOR LIGHTING
Potential Number of Units Affected: 21
Summary:
CROSSROADS RV IS RECALLING 21 MY 2009 CROSS TERRAIN TRAVEL TRAILERS FOR FAILING TO COMPLY WITH THE REQUIREMENTS OF FEDERAL MOTOR VEHICLE SAFETY STANDARD NO. 108, "LAMPS, REFLECTIVE DEVICES, AND ASSOCIATED EQUIPMENT." THE TRAVEL TRAILERS WERE BUILT WITHOUT REAR REFLEX REFLECTORS.
Consequence:
LACK OF REFLECTORS COULD LEAD TO REDUCED VISIBILITY OF THE TRAVEL TRAILER INCREASING THE RISK OF A CRASH.
Remedy:
DEALERS WILL SEND REFLECTORS AND INSTALLATION INSTRUCTIONS TO CUSTOMERS. CUSTOMERS WILL HAVE THE OPTION OF INSTALLING THE REFLECTORS OR TAKE THEIR TRAVEL TRAILER TO THE NEAREST CROSSROADS RV CERTIFIED DEALER TO HAVE THE INSTALLATION DONE FREE OF CHARGE. THE RECALL IS EXPECTED TO BEGIN DURING MAY 2009. OWNERS MAY CONTACT CROSSROADS RV AT 937-596-6111.
Notes:
OWNERS MAY ALSO CONTACT THE NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION'S VEHICLE SAFETY HOTLINE AT 1-888-327-4236 (TTY 1-800-424-9153), OR GO TO HTTP://WWW.SAFERCAR.GOV .

From RVBUSINESS:

Even though Monaco Coach Corp. has struck a deal to sell its major assets to a subsidiary of Navistar International for $52 million, the Coburg, Ore.-based RV maker is racing to close the deal before it runs out of money and creditors run out of patience, according to The Register-Guard, Eugene, Ore.
At a hearing Friday (April 24) in U.S. Bankruptcy Court in Delaware, an attorney for Monaco said the company had signed an asset purchase agreement with Workhorse International Holding Co., a Navistar subsidiary. The company’s main secured lenders - Bank of America and Ableco - have agreed to provide it with at least one more week of operating cash while Monaco officials try to “get them comfortable” with what they would be paid in the sale, said Robert Orgel, one of Monaco’s bankruptcy attorneys.
“How much they are to be paid is the key issue,” Orgel said. “The amount it takes to satisfy them may well be harder to achieve the longer it takes us to close a sale because we are incurring expenses every day and the ability to sell assets is limited.”
When it filed for Chapter 11 bankruptcy on March 5, Monaco owed Bank of America $38 million and Ableco $37 million. In a Chapter 11 case, a financially stressed company is given protection from creditors while it reorganizes its finances.
Orgel asked Judge Kevin Carey for an expedited schedule so the company could be put up for auction and the deal could be consummated by June 1. If the sale doesn’t close by then, creditors could move to liquidate Monaco.
But an attorney for the committee for unsecured creditors, Donald Detweiler, told the judge that the sale appears to benefit only the two lenders. Liquidation of Monaco’s assets or some other alternative may provide a better return to unsecured creditors, he said.
“There may be a better way to see value than what’s being proposed here,” he said.
Carey said he expects any reorganization plan to provide some value for unsecured creditors.
“The court can’t create value when value isn’t there, but I want a fair shot at unsecured creditors getting there,” he said.
Unsecured creditors are those that don’t have any legal claim on a company’s land, buildings or equipment. They get paid only after creditors with secured positions, often banks, get paid. If they get paid, unsecured creditors are likely to get something less than the total amount they’re owed. The company has thousands of unsecured creditors.
In a court filing, Monaco attorneys argued that an asset sale to a buyer that would operate the RV maker as a going business would provide the most benefit to everyone concerned. Doing so would “create direct value for creditors, saving 2,000 or more jobs in communities in Oregon and Indiana … and creating ongoing value and revenue for a large number of (Monaco) vendors, dealers and other creditors.”
It’s not clear from the company’s court filings how many people would be employed in Coburg and Indiana if the factory were to resume production.
Navistar, a massive Illinois corporation that builds diesel engines, school buses, heavy trucks and military vehicles, announced a month ago that it had signed a nonbinding letter of intent to buy Monaco’s core assets for up to $50 million. On Wednesday (April 22), Monaco signed an asset purchase agreement with Workhorse, a Navistar subsidiary serving as a “stalking horse” purchaser. In bankruptcy cases, a stalking horse bid sets a threshold price so that other potential bidders can’t low-ball the purchase price.
Judge Carey will conduct another hearing this week on bid procedures and other issues, including whether the secured creditors are willing to extend additional operating credit to Monaco while the sale moves forward. A sales auction would be conducted in mid-May, followed by another hearing May 22 at which Monaco would be seeking court approval for a sale and creditors could seek to block it.
Under the terms of the deal, Navistar would obtain certain manufacturing facilities located in Indiana and Oregon. In addition, Navistar will acquire all brands, intellectual property, inventories and equipment relating to Monaco’s motorized and towable recreational vehicle segments.
The deal would not include Monaco’s resort properties, which the company is attempting to auction separately. Nor would it include its Roadmaster Cargo Trailer business and several industrial properties.
“We are excited to move forward with the tremendous resources of Navistar supporting our great products,” Monaco CEO Kay Toolson said. “Everyone at the company is ready and committed to again build the highest quality RVs in the industry, offer the best customer support and bring jobs back into the communities in which we operate. We appreciate the patience of our employees, dealers, suppliers and RV owners as we navigated through this challenging environment.”
The company said it appears that no proceeds from the sale would be available for distribution to shareholders.