Jacobs clears deck for Genmar bid
The longtime CEO of the boat builder is resigning so he can bid for the company in bankruptcy court free of conflicts of interest.
By JENNIFER BJORHUS, Star Tribune
Last update: November 9, 2009 – 9:44 PM
Irwin Jacobs, longtime captain of Genmar Holdings Inc., is stepping down as the boatmaker heads to a bankruptcy auction.
Jacobs is resigning as CEO, chairman and a director following his public comments about wanting to bid on his own company, Genmar said in a release Monday. Mark Sheffert, Genmar’s chief restructuring officer, said the move will eliminate potential conflicts of interest should Jacobs want to participate in the asset sale.
In an interview, Jacobs said he was “fully supportive” of the move. But he wouldn’t say whether he’d bid on the company or how much he’d offer.
“I’m keeping all my options open,” Jacobs said. “Whatever I decide to do … I can’t do it as CEO and a board member of this company.”
So-called insider bids are subject to higher scrutiny in bankruptcy asset sales, according to attorney Sheryl Toby, a director at the American Bankruptcy Institute.
A stalking horse bidder in the Genmar auction hasn’t yet been chosen and the deadline for selecting one is Nov. 18, said Stephen Spencer, a director at Houlihan Lokey Howard & Zukin Capital Inc., which is advising Genmar in bankruptcy.
A source close to the process identified the potential stalking horse bidder as Platinum Equity, a Beverly Hills-based firm that buys distressed companies. Platinum Equity declined to comment.
The issue of the identity of the stalking horse bidder in the Genmar case emerged in bankruptcy court in St. Paul last week when federal Bankruptcy Judge Dennis O’Brien asked whether a potential stalking horse had been identified. Genmar attorney Jim Baillie said yes and that it was “an unrelated party to the debtor.”
Minneapolis-based Genmar Holdings Inc., whose lineup of boat brands includes Glastron, Ranger and Wellcraft, filed Chapter 11 bankruptcy in June.
Last week, O’Brien approved plans for Genmar to reimburse the potential bidder for its effort and expenses up to a maximum of $700,000. He gave Genmar until Jan. 31 to file its reorganization plan.
Jacobs said last week in an interview that he originally proposed a reorganization and refinancing plan to the committee of unsecured creditors. He said they rejected it in favor of an asset sale.
“The unsecureds wouldn’t approve the deal so I switched gears and became a bidder for the company,” Jacobs said. “I would think, from a practical point of view, that we should be the best bidder or buyer for the company.”
Gary Potter, chairman of the committee of unsecured creditors in Genmar’s bankruptcy, said Jacobs’ proposal was a verbal one of possible financing, and that it lacked enough detail for the group.
“We believe that the auction at this time will result in the sale of more assets than what was proposed verbally,” Potter said.
Potter is vice president and general manager of EZ Loader Custom Trailers Inc., a manufacturer in Midway, Ark., that is one of Genmar’s largest suppliers. He said he’s laid off a lot of employees since the recession roiled through the marine industry.
Jacobs earned the nickname “Irv the Liquidator” for corporate raids in the 1980s junk bond era. He bought Genmar (then Lund Boat Co.) in 1978 and is Genmar’s largest shareholder with about 40 percent of its stock. The Pohlad family of Minneapolis also has a stake in the boatmaker, according to Jacobs.
At its peak in 2006, Genmar had annual sales of more than $1 billion, but revenue sank to just $460 million for the year ended June 30. Genmar blamed the recession, as well as tighter loan requirements from banks, for forcing it into bankruptcy protection. Wells Fargo & Co. and Fifth Third bank are Genmar’s two secured creditors and together are owed $75 million.
Potter said he doesn’t blame Genmar’s management for its troubles. He hopes a big auction will drive up the company’s price and improve the odds that the 4,000 unsecured creditors will recoup some money.
“The company’s worth is only what the market will bear,” Potter said. “It’s too early for anybody to speculate what is going to happen over the next 39 days.”
The above article is courtesy of the Star Tribune. www.startribune.com