On November 15, 2009, Champion Enterprises filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware. According to Champion’s Declaration in Support of First Day Bankruptcy Motions (the “Declaration“), the company’s bankruptcy is the result of an overall decline in the demand for manufactured housing and tightening of credit for potential home buyers. Based in Troy, Michigan, Champion manufacturers homes at 22 home building facilities in 13 states. At the time it filed for bankruptcy, Champion employed 1994 employees.
The Company’s Financials
Champion lost $52 million in 2008, compared to a profit of $3.9 million in 2007. Sales dropped by 23% during this same time period. For the second quarter of 2009, Champion’s revenues dropped over 55%, down to $129.5 million compared to $289 million in the second quarter of 2008. According to its Declaration, the company’s debt structure is as follows:
- Term loans of $45 and $59 million;
- Letters of credit for $40 and $43 million; and,
- Convertible unsecured notes of $180 million.
First Steps in Bankruptcy
Champion’s Declaration summarizes the various first day motions it filed at the same time that it filed for bankruptcy. One of the more significant “first day motions” is a motion to approve debtor in possession financing to fund Champion’s restructuring. According to the Declaration, Champion considered seeking debtor in possession (“DIP”) financing from third parties, however, Champion’s prepetition lenders (with liens on substantially all of Champion’s assets) rejected certain proposals for alternative financing. Champion weighed the risks associated with litigating with its prepetition lenders over third party financing and instead decided to borrow from its prepetition lenders. Under the DIP financing motion, Champion seeks $32 million in a “new money loan.”
During the months leading up to bankruptcy, Champion attempted to find a suitable buyer for the company. As of the petition date, Champion had not found a buyer, but hopes to do so under the sale provisions of the Bankruptcy Code. This bankruptcy proceeding is before the Honorable Kevin Gross. Click here to review the Chamber Procedures for Judge Gross.