Genmar Update
FLW Drops Engine Motion, Changes Counsel

Photo: FLW Outdoors

Judge Dennis O'Brien granted FLW Outdoors the expedited, emergency relief it sought and gave permission for the tournament company to take possession of the motors, and also scheduled a hearing on the motion for Monday, Nov. 16.

The committee of unsecured creditors today filed an objection to that motion, and stated in court documents that in "the short time" the committee has had to respond to the motion, it "has not been able to learn all the facts necessary to respond to this motion," and furthermore believes strongly that "FLW does not have a perfected interest in the engines."

Following that objection, debtor Genmar, plus creditors GMAC and Wells Fargo, filed separate objections to the motion. The Genmar and Wells Fargo motions were particularly lengthy and detailed.

Arguments

The basis of the objections was that FLW Outdoors did not prove it retained title to the engines. Instead, the objections presented evidence that the engines were either sold or consigned to Ranger and Stratos, and under the Uniform Commercial Code, title transferred to Ranger and Stratos once those companies took possession of the motors.

The objections argue that such a fact makes the engines Ranger and Stratos property, under protection of the bankruptcy court.

The Wells Fargo objection noted: "FLW Outdoors has not met its burden to show that cause exists to grant the relief requested on shortened notice. The debtors (Ranger/Stratos) have had possession of the engines since the petition date. FLW Outdoors could have moved for relief from stay at any time over the past 5 months if it believed that its interest in the engines was at risk of deterioration, but instead waited over 5 months to bring this motion."

Wells Fargo also argued: "The only evidence the court has that FLW Outdoors and the debtors agreed that title to the engines would not pass until a later time is FLW Outdoors’ statement that such an agreement existed. Leaving aside the fact that the actual terms of the agreement are difficult to ascertain from the motion, there is no proof of this agreement other than FLW Outdoors' assertion."

Furthermore, Wells Fargo submitted evidence in the form of a subordination agreement. That agreement was signed by FLW Outdoors on May 8 (less than a month before Genmar declared bankruptcy) for the benefit of Wells Fargo in relation to a $3 million loan by FLW Outdoors to Wood Manufacturing (Ranger). That loan was presumably Ranger's sponsorship fee.

In that subordination agreement, FLW agreed that in a bankruptcy or insolvency proceeding it wouldn't oppose or seek to challenge any liens or claims of Wells Fargo. Wells Fargo is a creditor in the bankruptcy case owed more than $80 million and thus contends that FLW Outdoors, through its engine motion, violated the subordination agreement.

FLW Withdraws

FLW Outdoors did not counter the arguments set forth in the motions, and instead withdrew its motion for expedited relief today.

FLW Outdoors also notified that court that it will change counsel. Until today, Maslon Edelman Borman & Brand represented FLW Outdoors, with Amy J. Swedberg as counsel of record. A new counsel was not named.

Again, the interplay of the various parties in the case paints a confusing landscape – Genmar, a company formed and, until Monday of this week, directed by Irwin Jacobs – objects to a motion filed by FLW Outdoors, a company still owned and directed by Jacobs.

Jacobs isn't mentioned in any of today's court proceedings, except for an indirect note in the Genmar objection that reads: "Debtors and FLW Outdoors are affiliates, as that term is defined in Section 101(2)(b) of the Bankruptcy Code, on account of common ownership. FLW Outdoors operates in the same offices as Genmar Holdings Inc., in Minneapolis, Minn."

Initially, popular thought among those close to the bankruptcy was that as Jacobs stepped down from Genmar, FLW Outdoors filed the motion to protect his interest in the engines.

And since Judge Dennis O'Brien granted FLW Outdoors the motion on Monday, that seemed to indicate FLW Outdoors would get the engines.

Yet FLW Outdoors' sudden withdrawl of the motion, and its change of counsel, could indicate a derailed or refocused strategy as the end game in the Genmar sell-off begins.

Notable too is that Jacobs this week effectively moved from the position of debtor to that of creditor via his ownership of FLW Outdoors. He is thus privy to all the bid proceedings as he makes his predicted play to purchase Genmar.