By By MIKE VOSS
Contributing Editor
Fountain Powerboat Industries Inc., parent company of Fountain Powerboats, has filed for Chapter 11 bankruptcy protection.
The filing, which occurred Monday morning with the U.S. Bankruptcy Court in the Eastern District of North Carolina, was made so the company can survive and protect Fountain employees, said Reggie Fountain Jr., the company’s founder and chief executive officer, on Tuesday. The company intends to keep operating.
“You wish you didn’t have to make the decision. … My name is on the company,” Fountain said.
The company, which owes $19.6 million to Regions Bank, its largest creditor, plans to sell its assets, including its Washington plant and tooling operations, its brand names and unsold Fountain and Baja inventories, according to court documents. Fountain acquired the Baja line last year. Fountain expects those assets to sell from $6 million to $8 million.
Within the next several weeks, the work force at the company’s plant in Beaufort County will be reduced to 10 or 12 workers, according to Fountain.
The company will reorganize and restructure as it continues to seek investors in the company, which Fountain said will result in him no longer being a majority stockholder in the company. The company’s proposed restructuring and reorganization is “basically a carbon copy of what GM did” earlier this year, Fountain said.
“It sends you to heaven and sends you back as fresh as a new-born baby,” Fountain said of the company’s chance to emerge from bankruptcy protection.
Cede and Company owns about 2.2 million common shares of company stock, with Fountain owning about 2.1 million shares.
Fountain said he is talking with prospective investors — at least 10 — in the company. Those investors would become majority shareholders in the revamped company, he said.
“We’d have a lot more money in the company because these investors come in,” Fountain said.
“This is just an unusual thing that’s happened this year,” Fountain said of the recession forcing the company to seek bankruptcy protection. “I guess I should have listened to my mother and father and put aside money for a rainy day … I didn’t put aside enough money for a rainy day.”
That rainy-day money, needed by the company for the first time in 30 years, will come from investors, Fountain said.
Fountain said he expects a reorganized company to emerge “in less than 45 days and possibly as little as 30 days” with as many current employees on the job as possible.
The filing comes about two months after the Washington-based company hired an investment banker to help it look for additional capital. The company makes sports boats and fishing boats on a 65-acre complex on the south side of the Pamlico River.
In July 2008, the company said it had plans to hire 250 workers at that facility, but the recession prevented that from happening.
In November 2008, the company laid off 70 workers. In February, the company announced it had lost $3.35 million and experienced a 62 percent decline in sales for its second quarter, which ended Dec. 31, 2008. That report come out one business day after it was delisted from the New York Stock Exchange Alternext US stock exchange. The company had been under review for violating two financial standards. According to the exchange, one violation was that the company didn’t have enough money, and the second was that the shares of its stock being traded — added together — were not valuable enough.
In June, Fountain said he was willing to sell a stake in the company to get the capital needed to better weather the recession. He retained Jacobs Capital, a Raleigh firm, to find that money.
Fountain said then he needed extra cash to tide his company over during lean times, even though he believed the company is outperforming its competition.
“We’re selling more than anybody else in our segment of the business, but what we’re selling’s still not enough, so that tells you where the rest of them are,” he said in June.
The company has cut its work force from more than 400 workers to less than 100 employees during the past several years.
Filing for Chapter 11 bankruptcy protection frees a company from creditors’ lawsuits as it reorganizes its finances. The debtor’s reorganization plan must be approved by a majority of its creditors. Unless the court rules otherwise, the debtor remains in control of the business and its assets.