Another big builder in bankruptcy.

[Jackdaw]

This time Bavaria. Fromm the German journal Boot Magazin.

Bavaria Insolvent
Fridtjof Gunkel on 20.04.2018

The former largest German shipyard has filed for bankruptcy - According to information available to the boat magazine investors have withdrawn their capital

Difficult weeks lie ahead of the employees of the once largest German sports boatyard. As the boat magazine learned from reliable sources, the shareholders of Oaktree and Anchorage filed for bankruptcy. They do not want to provide any further capital for the maintenance of the business. This is over-indebted on the balance sheet. The liabilities amount to several hundred million euros.

Before that, the shipyard and managing director Lutz Henkel , who had been employed since the beginning of 2015 , reportedly parted ways : whether this was for his financial benefit with a severance payment or as a consequence of the unsuccessful effort to bring the company out of the red in the long term. is unclear.

Both news come as a surprise, after all, Bavaria had attracted attention with a brilliant appearance at the boot Düsseldorf ("Bavaria World") as well as various innovations and demonstrated its strength to the outside world.

Too much of the good and the big? There are some reasons for that. For Henkel's strategy meant a repositioning of Bavaria against the better-placed competition. And internally there were apparently problems. Insiders reported serious production and delivery issues last year after the proven assembly line method had been modified.

The takeover of the French catamaran brand Nautitech in 2014, however, is rated as a success. Given the continued booming cat market and the location of the La Rochelle shipyard on the French Atlantic coast, this piece of meat from the company is likely to be a well-to-sell part of Bavaria if no buyer is found for the entire company construct.

An official statement of the shipyard is in preparation, as well as the appointment of the insolvency administrator.

http://www.boote-magazin.de/aktuell/news/sondermeldung/a49124.html

 

[dlochner]

This is over-indebted on the balance sheet. The liabilities amount to several hundred million euros.

Interesting. Is this result of another over leveraged buyout by a private equity firm? Or just poor business practices?

 

[Davidasailor26]

Heard the story during the 2016 Annapolis Boat Show that Bavaria had terminated its relationship with Bavaria US. Kind of figured then that business probably wasn't great. Wonder if one event led to the other.

 

[kloudie1]

Sad to hear.. They've made some good boats over the years..
I always thought that their build quality was a bit above Catalina and Hunter and most Beneteaus ..

 

[Gunni]

Looks like Administration, not Bankruptcy. The management group quit after a fight with the hedge funds bankrolling Bavaria. Mgmnt wanted funding for expansion and the money men balked. If I were to guess it is because the hedge funders don’t know a jib from a genoa and the margins don’t look rich enough. Boating is experiencing the loss of visionary owner/operators. Henri Amel, we miss you!

 

[Jackdaw]

Looks like Administration, not Bankruptcy. The management group quit after a fight with the hedge funds bankrolling Bavaria. Mgmnt wanted funding for expansion and the money men balked. If I were to guess it is because the hedge funders don’t know a jib from a genoa and the margins don’t look rich enough. Boating is experiencing the loss of visionary owner/operators. Henri Amel, we miss you!

Administration IS bankruptcy. Its the lesser form vs liquidation, but they still have to sort out the cash crunch. Kinda like ch11 v ch7. I agree that the cash needed to launch both a mega yacht program as well as powerboats probably gave the money guys heartburn.

 

[Gunni]

Administion is a Euro variant of Bankruptcy with lots of different aspects and many fewer courthouse complications. Kind of like Chapter11 but not really. Bavaria’s Administration appears to mean the company managers are gone and the owners have to find a new management group to run the business because they really have no idea how to manage what they own. Bavaria doesn’t appear to have a money problem and boat building continues. They have a growth money problem.

 

[Jackdaw]

This could get ugly. Oaktree is a distressed asset (vulture) capital firm, and they loaded the Bavaria with the debt of its own purchase. Now current profits are not covering the debt obligations. Their #1 priority will be to save as much of their money as they can.

They have a quarterly earnings call of Thursday. Could be interesting.

http://ir.oaktreecapital.com/phoenix.zhtml?c=212597&p=irol-EventDetails&EventId=5270137

 

[dlochner]

Watch for the same thing to happen to West Marine. They were bought by a private equity firm with a history of driving companies into bankruptcy.

 

[Jackdaw]

Watch for the same thing to happen to West Marine. They were bought by a private equity firm with a history of driving companies into bankruptcy.

Indeed, but these things are not always what they look like.

In 2007 Bain bought Bavaria for $1.1 BILLION, spectacularly overpaying just before the start of the financial crisis. The old ownership made out like bandits, but pretty much doomed the company.

In 2009 Bain has had enough, and takes a US$400M loss selling to Oaktree. To minimize their exposure, Oaktree places most of the cost of the sale on the Bavaria books as debit. All is well as long as you can service the debt with net profits. Apparent that day is past.

But here's the thing. I once came into a company after such an event as part of new management. The CEO (who was from the Capital Company) told me that they way they work is to tell ailing company to not call them until its the absolutely last resort. One step before shutting down the place down in liquidation. Because its going to be a crappy deal, but beats the doors closing. That's where Bain was. The last buy in 2009 gave Bavaria a chance.

 

[Gunni]

Oaktree is a distressed asset (vulture) capital firm, and they loaded the Bavaria with the debt of its own purchase.

They are are a Hedge Fund. Their investors expect big short-term gains and can assume big losses. West Marine got bought by a private equity fund -long term gains.

 

[dlochner]

West Marine got bought by a private equity fund -long term gains.

Ask the folks at Oneida Silver in, Sherrill, NY. Monoroy came into rescue them and drove them deeper in to debt. A couple of the executives started a new company in the same facilities. Oneida Silver is the only US based maker of silverware. (admittedly this is the Reader's Digest version of the Oneida Silver story.)