More financial uncertainty in the outdoor industry.

Only a few months ago, Irwin Jacobs was talking about plans to start a finance group to help boat enthusiasts secure financing in a credit market so tight that good credit borrowers couldn’t get a boat loan. With that financing arm, Jacobs said, Genmar would hopefully duplicate what he felt was one of the most successful units ever at General Motors- General Motors Acceptance Corporation (GMAC)- it’s finance unit.

Late Monday afternoon, Jacobs’ Genmar Holdings, Inc. shocked the boating and outdoor world with a filing for protection from creditors via a Chapter 11 bankruptcy petition.

According to the filing, the continued recession and higher gasoline prices have hammered Genmar and a product line that extends from 12-foot fishing boats to luxury yachts. Sales had dipped in 2008, but had plummeted since then.

As the man once known as “Irwin the Liquidator” for his astute purchases of bankrupt businesses said, “Even up until the last few weeks, this is something I never even dreamt was a remote possibility.”

The Chapter 11 petition, filed in St. Paul, Minnesota, lists assets of $237.5 million and liabilities of $216.4 million. Omitted from the filing are more than $400 million in “intangible assets”. The only secured creditors, Wells Fargo and Fifth Third Bank, are owed $75 million.

In fact, the filing credits Wells Fargo with forcing Genmar into court through its continued reduction in Genmar’s credit lines. “Despite restructuring steps and infusion of significant equity, the bank reduced [credit] availability,” the bankruptcy filing states. “The bank rejected all … proposals for making adequate capital available and continued to reduce the borrowing base.”

Despite the filing, Jacobs told me yesterday that Genmar is still viable. In fact, he said, “It’s a difficult thing, but I expect Genmar to come out of this situation even stronger than before.”

Jacobs says Genmars’s revenue for the year ending June 30 should drop by more than half, resulting in a cash operating loss of $32-35 million, compared with an operating profit of $9.7 million in 2008.

The company has taken fairly drastic steps during the downturn to minimize expenses, closing plants and cutting workforce, but continuing sales drops have trickled up from struggling dealers to now-struggling manufacturers.

According to Jacobs, Genmar has already lost nearly a quarter of its dealers to tough economic times. With a flood of repossessed boats on the market, even more dealers are, according to Jacobs, “just hanging on.”

To an individual, the filing might look unusual. After all, Genmar has not missed any payments on its loans. Those loans, however, had strict capital requirements that the lagging sales had depleted. Despite an injection of more than $40 million in the last few months, the company couldn’t meet the requirements in time to meet the bank’s deadline.

In the Chapter 11 filing, Genmar will be given breathing room that will allow it to put together a business plan that will resolve the issue with its creditor banks.

“It’s difficult,” Jacobs told me, “but we’ll come out of this situation just fine.”

Meanwhile, Jacobs says, anglers shouldn’t have any concerns about the boats in Genmar’s lines, especially Ranger. “Ranger,” he said, “will be here when you and I are gone from the earth.”

That position was echoed by Ranger president Randy Hopper in a statement released yesterday afternoon: “…reorganization is designed to allow Ranger to uphold its commitments to its outstanding dealer network and loyal customers while fulfilling the 41-year-old reputation of its product line and business operations. Going forward, Ranger has no plans to relinquish its leadership position. Our commitment to quality construction, technological innovation and service at all levels will not wane. Likewise, we remain dedicated to our long-standing involvement with so many great tournament anglers, organizations, and friends throughout the industry. While the fishing segment has not been immune to adverse economic conditions, it has not been affected to the same degree as other boating categories. I believe that our segment has hit bottom and we are seeing recent evidence of improvement. ”

(Read the entire Hopper statement here)

With the Genmar filing yesterday and the closure of Knight Rifles last week, it seems the financial uncertainty is far from over in the outdoor industry.

As always, we’ll keep you posted.

–Jim Shepherd