Palm Harbor Homes Files for Chapter 11 to Provide Liquidity
November 29 2010 - 2:09PM
Business Wire
Palm Harbor Homes, Inc. (NASDAQ: PHHM) today announced
that it and five of its domestic subsidiaries, Palm Harbor
Manufacturing L.P., Palm Harbor Albemarle L.L.C., Palm Harbor Real
Estate L.L.C., Palm Harbor GenPar L.L.C. and Nationwide Homes Inc.
(collectively the “Company”), filed voluntary petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. The
Company is taking this action to provide liquidity and partner with
Fleetwood Homes, Inc., a subsidiary of Cavco Industries, Inc.
(NASDAQ: CVCO) through a sale process pursuant to Section 363 of
the Bankruptcy Code in order to support ongoing operations.
In conjunction with the filing, the Company has received a
commitment of $50 million, which may increase to $55 million if
certain conditions are met, for a debtor-in-possession (DIP) credit
facility from Fleetwood Homes that will be used to extinguish all
obligations due on the existing Textron Financial Corporation
facility and fund post-petition operations, commitments to
customers, and employee obligations.
“Prolonged poor industry conditions have depleted the liquidity
of Palm Harbor Homes despite management’s ongoing efforts to
improve and scale back operations as prudent and restructure our
existing debt. Over the last several months, we have a conducted a
thorough process to identify the best capital partner for our
Company,” said Larry H. Keener, chairman, president and chief
executive officer of Palm Harbor Homes.
“Management and the Board have decided that the Chapter 11
process is the best alternative available for all stakeholders and
provides us with the most timely and orderly means to recapitalize
our Company. In support of this decision, we are pleased to
announce our commitment for Debtor-In-Possession financing with
Fleetwood Homes to provide us the liquidity runway to participate
in a court approved 363 auction process to seek the highest
recovery for our various stakeholders,” added Keener.
Fleetwood Homes, Inc. is owned by Cavco Industries, Inc. and
Third Avenue Value Fund (TAVFX). Third Avenue Management, the
investment advisor to TAVFX, is a New York-based company with
expertise in value and distressed investing. A subsidiary of
Fleetwood Homes, Inc. will be the stalking horse bidder for the
assets and certain warranty and other liabilities of the
Company.
Palm Harbor Homes’ affiliates, Standard Casualty Company,
Standard Insurance Agency, Palm Harbor Insurance Agency and
CountryPlace Acceptance Corp., were not included in and their
operations will not be impacted by the filing. These entities will,
however, be included in the merger that results from the auction
process.
Joseph H. Stegmayer, chairman, president & chief executive
officer of Cavco Industries, Inc. added, “We are pleased to have
this opportunity to partner with Palm Harbor Homes and look forward
to a successful outcome of this process. Our mutual intention is to
help Palm Harbor continue its heritage of providing quality home
building, retailing, finance availability, competitive insurance
products and outstanding customer service. Our combined businesses
will have a strengthened foundation and market presence.”
The Company emphasized that daily operations are expected to
continue uninterrupted throughout the restructuring. The Company
filed approximately 20 “first-day motions” covering the
continuation of employee programs and business operations, as well
as its post-petition DIP financing, the continuation of supplier
payments, customer contract and warranty programs, retailer rebate
programs, and other case administration matters. The Company
anticipates that these first-day motions will be heard this week.
Pursuant to the relief requested in those motions, homes will be
sold, manufactured and delivered as normal, employees will be paid
and will continue to receive the same benefits as before the filing
and all customer contracts and warranties will be honored.
“Despite the current challenges in our core markets, we still
believe there are considerable opportunities in the factory-built
construction industry in the future,” said Keener. “We fully expect
to proceed through this restructuring swiftly and continue
designing and manufacturing high quality products for our
retailers, builders and developers.”
The Company filed its voluntary petitions in the U.S. Bankruptcy
Court for the District of Delaware in Wilmington.
For further information please contact the Company’s toll-free
information line at 1-888-220-3896 or visit the Company’s
restructuring website at www.restructure.palmharbor.com.
The Company’s legal advisor is Locke Lord Bissell & Liddell;
its financial advisor is Raymond James & Associates and its
restructuring advisor is Alvarez & Marsal.
The Company also announced today that it has appointed Brian
Cejka of Alvarez & Marsal as its Chief Restructuring Officer.
Mr. Cejka will report to the Company’s Chief Executive Officer.
About Palm Harbor Homes, Inc.
Dallas, Texas-based Palm Harbor Homes is one of the nation's
leading manufacturers and marketers of factory-built homes.
The Company markets nationwide through vertically integrated
operations, encompassing manufacturing, marketing, financing and
insurance. For more information, please visit
www.palmharborhomes.com.
Forward-Looking Statements
This Press Release contains forward-looking statements that are
subject to certain risks and uncertainties that could cause actual
results to differ materially from those projected. The most
significant among these risks and uncertainties are: (i) the
ability of the Company to continue as a going concern;
(ii) the Company’s ability to obtain Bankruptcy Court approval
with respect to motions in the chapter 11 cases; (iii) the
ability of the Company and its subsidiaries to develop and
consummate one or more plans of reorganization with respect to the
chapter 11 cases; (iv) the effects of the Company’s Bankruptcy
Filing on the Company and the interests of various creditors,
equity holders and other constituents; (v) Bankruptcy Court
rulings in the chapter 11 cases and the outcome of the cases in
general; (vi) the length of time the Company will operate
under the chapter 11 cases; (vii) risks associated with third
party motions in the chapter 11 cases, which may interfere with the
Company’s ability to develop and consummate one or more plans of
reorganization once such plans are developed; (viii) the
potential adverse effects of the chapter 11 proceedings
on the Company’s liquidity or results of
operations; (ix) the ability to execute the Company’s
business and restructuring plan; (x) increased legal and
professional costs related to the Bankruptcy Filing and other
litigation; (xi) the Company’s ability to maintain contracts
that are critical to its operation, to obtain and maintain normal
terms with customers, suppliers and service providers and to retain
key executives, managers and employees. The cautionary statements
provided above are being made pursuant to the provisions of the
Private Securities Litigation Reform Act of 1995 (the “Act”) and
with the intention of obtaining the benefits of the “safe harbor”
provisions of the Act for any such forward-looking information.
Additional risks that may affect the Company’s future performance
are detailed in the Company’s filings with the Securities and
Exchange Commission, including its most recent Annual Report on
Form 10-K and its Quarterly Reports on Form 10-Q.
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