Reggie Fountain took the time to talk to Performance Boats about the recent events surrounding Fountain Powerboats. He's our conversation.
PERFORMANCE BOATS: There's been some activity lately with Fountain. First, Chapter 11, then the reports that Hustler was interested in acquiring the company, then new reports that Fountain was sold to an investment group. Is that correct?
REGGIE FOUNTAIN: Not yet, no. Nothingís happened yet. That wonít happen until Oct. 5, and somebody will buy it. Originally it was the bank; now someone else has bought the bank's note. And that note will then be sold on Oct. 5 to the highest bidder, and that person will then own Fountain Powerboats. But it canít be officially sold until sometime after Oct. 5.
PB: Tell us about what happened with Oxford Securities.
RF: There are several investment groupsómaybe as many as a dozen or soóthat are looking at that. And so, one of them certainly will be the one thatís already bought the note. And itís not anybody known in the marine industry: itís a company called Oxford Securities. And they bought the note. It doesnít necessarily mean that theyíll own it after the auction; it just means that they are in a good position to own it if they want, since they own the note now. If somebody wants to bid it up, they could bid it up. It doesnít cost them a lot to up bid it, because theyíve already bought it. They are pretty well in the driverís seat to own it, if thatís what they want to do.
PB: What is your outlook for Fountain for the next year or so?
RF: I wonít know exactly how thatís going to go until all this is completely done. Iím not in charge of all the things that are happening. I canít control them. Not having any control, and not exactly sure how they are going to turn out, Iím really not in any kind of position to make any projection into what might happen until I know how it turns out in October. I'll have a pretty good idea who the owner is then, and Iíll know how I can deal with it from that point forward.
PB: Are any boats being produced right now?
RF: Yes, we are still building boats right now. A few. Not many people are building many right now. We actually built quite a few boats over the summer...not many compared to what we used to way back, you know, 15 years ago when things were going good. Weíre building 25 to 30 percent of what we built. But you know, we were building more than anybody else in the high performance sports boat market except Bajaóand now we got Baja too. Needless to say, sales on all that stuff have gone down dramatically.
PB: Do you think Fountain will make its usual standout appearance at the upcoming Miami Boat Show?
RF: I would think so. I think Fountain would be there, sure. Depending on whoever owns it and however they decide to run it, Iíd be surprised if they didnít show up at the boat show.
PB: What about you personally? What will be your role at Fountain in the years ahead?
RF: Well, Iím in the process now of getting with the people that are investing in the company to see how it will turn out between me and them. Itís mostly from their point of view; their call as to whether they still need to have me helping them. If they do, itís up to me to decide if I want to do that. Neither one of us has made our minds up except to say Iíve had an awful lot of opportunities dangling out there, at this time, in the event I wasnít doing what Iím doing right now.
PB: Imagine your life as a free agent. Are you still building boats? Are you racing full time?
RF: Probably consulting with people how to build good boats that go fast. Iím pretty well noted for that, I guess. And Iíve got 315 apartments, a shopping center, a grocery store that will keep me from starving and having to go on the welfare lines. (Laughter) So I think Iíll get along all right on that. So, probably in the boat business, I'll probably be a consultant or something if I weren't working for this company. As Yogi Berra used to say, ďIt ainít over 'til itís over." I gotta just wait and see how it turns out.
Why is RF not selling his 315 apartments and the shopping center and buys Fountain - or does he think that apartments and shopping center are a better investment and let others loose money in the boat business
My two cent
a boat company in size of Fountain together with Baja can not make money in these days , because the market worldwide is down for high performance boats
You can only survive by giving the market what it is asking for , Cruisers and yachts and family boats in the 30-50 foot range
Only small PBO (Performance Boat only) building companis that only have to find 40-60 clients worldwide can survive
all the others have to concentrate on what the market is now asking for
So if Baja could not make money in the last two years, and Fountain could not make money, why should a new investor be so much more smart than the previous owners and change course by 180 į - maybe they will need Harry Potter in their new team
It says alot about the industry outlook in general if Reggie isn't going to put up a fight for it. It's hard for everybody to make money these days...it will take alot of optimism and cash to keep the name going...waiting for things to get better it the performance boat market. Obviously Reggie isn't too excited about the outlook either.
So the way I read this is, Oxford bought the note from the bank, which probably had the assets as secured collateral. I don;t know when this was done, but they probably bought it at a discount when the bank knew the company was impaired. Reggie loses 51% or basically nothing, Oxford gains the assets for whatever they purchased the note for, and all the other creditors (most anyway), eat what they had. Maybe not as cut and dry as all that, but probably a good basic overview.
Reggie will probably be back, who knows, and in what ownership and/or executive capacity. It would be a similar result to having your home foreclosed on, and having a buddy buy your house back at 30 cents on the dollar.
Oxford is a private equity company. Their investors are not disclosed. For less than the cost of his new house, some secret investor can own the company. If RF happened to be that secret investor, he would be effectively earning well over $15million in a very down year for the boating industry. Seems clever to me. FPB has never made that much after tax before.
I don't know if I am right, but this hypothesis fits all the data I have seen.
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