Fountain Powerboats is Out of CH. 11 Reggie is On a Mission

Oxford Investments of La Jolla, California offered $8.75 million to the court for the assets of Fountain Powerboats without Reggie being CEO of the going-forward business. Liberty Associates offered a million dollars less, but with Reggie running the company. If you were the Federal Bankruptcy Judge in the Eastern District of North Carolina, which firm would you have awarded the business to?
If you said the low bidder, then you understand why Judge Randy Doub ruled as he did. FYI – Liberty Associates has owned Donzi and Pro-Line for years, so they know what the boat business is really like and have no illusions.

Reggie Fountain has taught some West Coast investment suits a thing or two about justice in the land of the Good Old Boys and about the value of being the man. Ring one up for the Tar Heels! Ring another up for Reggie!

“I didn’t listen to my mother,” Reggie told us, “She always said that I should put money away for a rainy day, and I didn’t do it.”

Last summer, as the world started to close in on Regions Bank of North Carolina, it called a $20 million note it held from Fountain Powerboats during the depths of the worst boating recession in 60 years. Fountain filed for Chapter 11 protection. A couple of months later, Oxford Investments bought the note from Regions Bank for $6.75 million, or about $0.33 on the dollar.

With their pronounced hawk beak, Fountain boats are instantly recognizable.

Oxford Investments

At first all was going well for this west coast investment company that takes over small businesses, then tries to build them up and sell them off for a profit. Oxford’s website says that it “…creates a vibrant entrepreneurial partnership with management to meet shared objectives based upon mutual respect and fairness.”

But then it refused to offer Reggie the CEO job in a “vibrant entrepreneurial partnership” and Reggie promptly filed papers with the court to the effect that the debtor would be worse off if Oxford was awarded the business. (In addition to being a former boat racer, Fountain also graduated from the University of North Carolina with a degree in law.)

The high-performance market is small so Reggie got into offshore fishing boats with his deep-V hulls.

The Good Old Days – 4 Years Ago

Reggie tells us that during his 30 years in business with Fountain Powerboats he sold over $1 billion worth of boats and its high point was in 2006 when Fountain had $80 million in sales and employed over 400 people, a sizeable number for the little town of Washington, North Carolina.

That year – the last good one for almost any builder in the boat business – Brunswick’s Baja also had sales of $80 million according to Fountain. Fountain took Baja off Brunswick’s hands in 2008. Now, Liberty Associates owns two brands that just four years ago racked up $160 million in sales. Perhaps now you see why some people thought it was a good $8 million investment.

Fountain’s 48 Express Cruiser with hardtop is his largest boat.

During the 30 years Fountain Powerboats years in business, Reggie told us that he spent between $75 million and $100 million on advertising, sponsorships of offshore racing, and offshore fishing tournaments. If this is true he probably spent on promotion something close to the largest boat builder in the world, Sea Ray, during the same period. The trouble was that in 2006 when Fountain was having his highest grossing year, Fountain sold about 350 boats, compared to 11,500 units for Sea Ray.

Man with a Mission

Reggie is now 69 years old and says that he will work until the day he dies on the thing which he loves the most – powerboats. He also says that he would like to buy back the company that he founded, and that Liberty Associates is amenable to the idea. (Liberty’s Bill Gates is Chairman of Fountain Powerboats.) That is going to take a lot of work, in addition to at least $8 million, if not a lot more.

Fountain 42 Intrepid patrol boat under construction.

There are 70 non-current Fountain boats out in the field that need to be sold before he can gear up production to levels of profitability. He says the company’s monthly nut is about $1 million and he has orders. Indeed, he is working his way through an order for 24 42’ patrol boats for the Bahamian government and according to the article below has hired back 120 employees.

Reggie is president, CEO, chief marketing officer, and -- as always -- the company’s number one salesman, strutting around at boat shows with his black racing outfit and signature gold chain with a circle of lightning bolts. His silky smooth southern drawl, gentlemanly manners and the twinkle in his eye are as infectious today as they were 30 years ago when he was just starting out. But he has a long way to go, and there are not too many laps left in this race. Good luck, Reggie, we're all rooting for you.

From the Washington, NC newspaper--

Fountain out of bankruptcy

By GREG KATSKI

Community Editor

Published: Friday, February 5, 2010 2:18 AM EST
CHOCOWINITY — Fountain Powerboat Industries Inc., parent company of Fountain Powerboats, is out of bankruptcy and back at work.

Following a hearing held in the U.S. Bankruptcy Court in the Eastern District of North Carolina on Wednesday, Randy Doub, chief bankruptcy judge, approved Fountain’s reorganization plan, lifting the company from Chapter 11 bankruptcy protection.

In late August 2009, Fountain filed for bankruptcy protection. Several weeks later, the company’s $19.6 million bank note was purchased by a third party, Oxford Investment Group. A bankruptcy auction of the company’s assets was set for early October, but the company instead moved to restructure its Chapter 11 bankruptcy protection and reorganize with Liberty Investments.

With Doub’s approval Wednesday, Liberty became the majority owner of Fountain Powerboats. Reggie Fountain was retained as the company’s president and CEO, and Bill Gates was named chairman.

According to Gates, Liberty Investments, which is based in Florida, also is majority owner of Donzi and Pro-Line Boats. Fountain called the investment group “avid boat-lovers.”

As part of the reorganization plan, Liberty agreed to pay Oxford Investments $6.9 million for the bank note and an additional $500,000 for unsecured debt. Fountain’s other creditors were awarded $500,000. The company also has transitioned from the public to private sector, and will not be traded publicly from this point forward.

“First of all, I’m pleased with the judge’s decision,” Gates said. “It was a little bit of a bumpy road, but we were confident all along.”

Gates, now the highest-ranking individual at Fountain, said he is optimistic about the future of the company.

“I’m confident Reggie can steer the company in the right direction,” he said.

Fountain said the success of the company that bears his name depends on the economy.

“If the economy comes back, Fountain comes back,” he said.

Fountain said the company’s performance at the Miami Boat Show, which starts Thursday, will be a “good harbinger for what to expect in the future.”

The company is shifting its focus from building what Fountain called “pleasure boats” to government-contracted boats to be used by the Navy, Coast Guard and other branches of the U.S. armed services.

Fountain referred to a 42-foot-long interceptor-type boat the company is working developing.

“It’s like the James Bond boat, but better,” he said.

The Bahranian government recently placed an order for 24 interceptors; the company has already built six, Fountain said.

After halting production for some time, the company began building boats again in earnest last November. Production was aided by Liberty, which helped finance Fountain operations during the reorganization process.

In November, the company made $300,000; in December, it made $1.2 million, Fountain said, adding that he hopes the company will be pulling in $3 million a month by March. With the rebound in production, the company has been able to hire 120 employees. As recent as October, the company had just 10 full-time employees, Fountain said.

If the company reaches $80 million in sales by the end of 2010, it can return its work force to 400-plus employees, Fountain said, adding that hiring more workers depends on how the market rebounds.

Gates expects it will take two to five years for the sportboat industry to recover.

“We understand that it’ll be slow to return,” he said, “but our vision is to lead the market.”