Fountain Powerboats Bankruptcy – 363 Sale Credit Bid Rejected, Proposed DIP Financing Motion Approved

See the Fountain Powerboats Docsheet Report for subsequent developments in the Fountain Powerboats bankruptcy proceedings.

Following five and a half hours of testimony and final argument, Judge Randy D. Doub of the Bankruptcy Court for the Eastern District of North Carolina ruled on October 9, 2009 that the proposed Section 363 sale credit bid of Oxford Financial Group (“Oxford”) for the operating assets of Fountain Powerboat Industries, Inc. (“Fountain Powerboats”) was not in the best interest of the Debtor’s estate.  The court instead approved a motion for Fountain Powerboats to obtain debtor in possession  financing from Liberty Associates for an amount up to and including $1.5 million.

Fountain Powerboats Seeks Bankruptcy Direction Sea Change – Reorganization Not 363 Sale

Fountain Powerboat Industries, Inc. and its 3 co-debtor affiliates (collectively the Debtors ) have moved Bankruptcy Court for the Eastern District of North Carolina (the “Court”) to authorize the Debtors to postpone the pre-ordained section 363 sale.  This is a U-turn for the Debtors who had pushed for a rapid 363 sale citing fears that a delay could result in the Debtors running out of money to fund operations.  The two fold reason for the turnaround – a probable credit bid by a recent acquirer of the pre-petition secured lender’s position and a potential white knight offer to provide debtor in possession (“DIP”) and exit financing.  This may be good news for the suppliers and vendors who have nearly $1.8 million in pre-petition trade claims.

Fountain Powerboats, Inc. – Largest Unsecured Bankruptcy Creditors

Fountain Powerboats, Inc. (“Fountain Powerboats”) together with 3 affiliated entities (”Debtors”) filed petitions on August 24, 2009 in Bankruptcy Court for the Eastern District of North Carolina for relief under Chapter 11 of Title 11 of the United States Code.  The Debtors are the leading high-performance boat manufacturer in the United States.  Debtors are engaged in the design, manufacture and sale of recreational offshore sport boats, sport fishing boats and sport cruisers.  In 2008, the Debtors acquired the Baja line from Brunswick Corporation.  The Debtors are seeking a court supervised auction and sale of substantially all of their assets.  In its pleadings, the Debtor states that its secured lender is substantially under-collateralized.  This bankruptcy looks like a rough one for the unsecured creditors.  Identification of the Debtors and largest unsecured creditors is provided below.