Irwin Jacobs has stepped down as CEO, chairman of the board and as a director of Genmar Holdings to avoid a potential conflict of interest as he pursues a purchase of the company.
In a letter dated Monday, Nov. 9, company president Roger Cloutier says the change was effective Nov. 6.
"I'm keeping all of my options open, everyone will just have to wait and see what the outcome is," Jacobs told Soundings Trade Only this morning, "I've stepped aside, I resigned from the board, so that I'm free to do whatever I want to do. Otherwise it would obviously be a conflict."
"Given the circumstances surrounding Genmar as it moves forward in the sale of the company's business and non-core assets, this change in Mr. Jacobs' role was made in the best interest of all constituents," Cloutier said in his letter. "The separation will allow Mr. Jacobs to pursue his objectives relative to Genmar's asset sale process in an effective and independent manner and eliminates potential conflicts of interest."
Since Genmar filed June 1 for Chapter 11 bankruptcy protection, it has been operating under the direction of Manchester Companies, a firm that serves as the chief restructuring officer.
"At that time, the CRO was given the full authority generally vested in the chief executive officer role," Cloutier said. "An office of the president also was established, which included two representatives of Genmar and two representatives of Manchester."
Mark Sheffert, chairman and CEO of Manchester Companies, commented that Jacobs has "given a great deal to the Genmar organization and the boating industry" and stepping down as head of the company will allow the sale process to move forward in an "effective and independent manner."
Less than two weeks ago, Genmar announced its intention to pursue a sales process rather than a reorganization as a means to exit Chapter 11.
New York-based bankruptcy attorney Leonard Bellavia, of Bellavia Gentile & Associates, told Soundings Trade Only it's not unusual in this economic climate for Chapter 11 reorganizations to result in straight liquidations.
"The bankrupt companies simply do not have the income to remain current on their obligations, even without the pressure of paying old receivables and creditors, especially secured creditors, have little patience seeing the continued deterioration in the value of their collateral," he said.
Bellavia also said that it would be "uncommon" for a current officer or shareholder of the company to bid on his own company in a bankruptcy sale, as it would create a conflict of interest.
Jacobs has said he plans to be the highest bidder for Genmar's assets. No other bidders have been named publicly.
"My interest was in the company intact, for the most part, that's all I can tell you," he previously told Soundings Trade Only. "I can't give you anything more than what's out there right now."
On Nov. 4, a bankruptcy court judge approved Genmar Holdings' motion to enter into an exclusivity and expense agreement with an unnamed potential stalking horse. This gives that unnamed bidder a 20-day exclusivity period. Also, Genmar has been authorized to reimburse this party up to $700,000 for "certain due diligence expenses under specific circumstances."
That bidder is not affiliated with Jacobs or Genmar, Sheffert said.
Jacobs had no comment on the potential stalking horse and said he had "no concerns at all."
Genmar has identified the potential stalking horse as "the party that has submitted the best offer to date from the standpoint of cash consideration and probability of consummation." It does not, however, identify that party, in order to "preserve the integrity of the sale process."
In an unrelated motion, the judge last week also extended the period in which Genmar has the exclusive right to file plans for reorganization through Jan. 31, 2010, and the exclusive right to obtain acceptances of such plans was extended through April 1, 2010.
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