Vans Files For Chapter 11 Bankruptcy

Latest update from Van’s:
Restructure plan forth coming by next week, but they are selling kits and parts and even hiring. They won’t be at SnF but will be at Osh and last but not least the RV-15 project has not been cancelled, just delayed. More to follow……
 
Here’s the restructure plan: https://storage.courtlistener.com/recap/gov.uscourts.orb.528157/gov.uscourts.orb.528157.113.0.pdf

These are the highlights that I copied from a post over on VAF:
  • Existing equity gets wiped out (including the ESOP which is being terminated).
  • The Van Grunsvan loans totaling $7m will be converted to equity (i.e. Van will be the sole shareholder).
  • Customers who made "priority" claims for their customer deposits get paid $3350 on the effective date of the plan (i.e. when approved by the court).
  • The remainder of deposits are grouped as unsecured creditors class and will get an "impaired" $0.55 on the dollar paid over three years -- a total of $2.7m or 80% of net disposable income through 2027. It's different amounts allocated for payments over the three years, so the payments would be uneven: $860,000 on or before june 15, 2025, plus $570,000 on or before June 15, 2026, plus $1,320,000 on or before June 15, 2027. However, they can be prepaid by the company at any time, say, if its disposable income is more than projected at this time. The projections are relatively steady for $69m to $73m in revenue in the next three years.
  • The company is allocating 20% of net income annually "reinvested in business operations" to hire additional staff, purchase more manufacturing equipment, and upgrade software.
  • Anybody with a "small" unsecured claim under $1000 will be paid 100% within 60 days from the effective date. If your claim is greater than $1000, you can elect to reduce your claim to $1000 in order to be treated as a "small" unsecured claim.
  • The company can object to claims up to 60 days after the effective date.
  • All replacements for LCP are expected to be shipped by November 2024.
  • 82% of customers with deposits elected to sign new contracts.
I don’t know anything about bankruptcy so I don’t totally understand what all of this means but it would appear to me that Vans is going to survive but at the cost of creditor losses.
 
tsts4 said:
I don’t totally understand what all of this means but it would appear to me that Vans is going to survive but at the cost of creditor losses.
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Pretty sure that's often the best outcome of a bankruptcy action. Usually both the company and the creditors are better off if each one takes a bit of a haircut but the company continues to operate. If the company is liquidated to pay off creditors, often the creditors get even less or at best only slightly more, but there is no more company.
 
Looks like they are terminating the plan, and restating it as profit sharing. There is wording in Sections 6.7 (c) (d) (e), that seems to indicate the ESOP participants will get something.
I'm definitely not a lawyer, so take this with a grain.

Debtor’s Board of Directors will accordingly amend and restate the ESOP as a profit-sharing plan for purposes of approving the termination of the ESOP and the related distribution of its assets to the participants and beneficiaries. The termination of the ESOP will occur as of the Effective Date and shall operate to fully vest all participants and beneficiaries in their remaining accounts under the ESOP on the Effective Date.(d) Debtor will take the following action with respect to the terminated ESOP immediately following the Effective Date: (i) update the ESOP records to reflect the cancellation of the common stock held by the ESOP; (ii) update the ESOP records to reflect the full vesting of all participants and beneficiaries in their remaining accounts under the ESOP;(iii) allocate any contributions from Debtor to the accounts of participants in accordance with the requirements of ERISA and the Internal Revenue Code; and (iv) direct the Trustee of the ESOP to distribute all remaining assets of the ESOP to participants and beneficiaries as soon as administratively practical. The distribution to participants and beneficiaries will proceed in accordance with the procedures set forth in ERISA and the Internal Revenue Code to afford such participants and beneficiaries the right to elect to direct the distributions to their individual retirement accounts or Debtor’s 401(k) Plan or directly to the participants and beneficiaries, less applicable federal and state tax withholding. In accordance with the requirements of ERISA and the Internal Revenue Code, any distributions from the ESOP that require consent where Debtor does not receive consent will be transferred to the 401(k) Plan for the benefit of the affected participants and beneficiaries.(e) Debtor’s guaranties of loans issued for the ESOP are terminated and will be treated as a General Unsecured Claim. Debtor shall fully perform all its other obligation sunder the ESOP through the completion of the termination process, including the liquidation of all assets held by the Trust through the distribution of all assets to the participants and beneficiaries in accordance with their directions for such distributions.

Here shows little in the ESOP related liabilities, but also 'Note 5' apparently includes ESOP in some fashion/portion.
Not sure what it all means, but hopefully not a total loss for employees. The number '55%' is scattered about in the document, but I don't know if that affects the ESOP.

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StraightnLevel said:
The loss of the ESOP will probably hit some of the employees pretty hard. That’s their retirement, wiped out.
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Hopefully the ESOP was in addition to a 401K with Safe Harbor matching and a boring selection of index and targeted date funds.
ESOP is usually the owner's retirement plan.
 
We knew builders are in a Hobson's choice in this space since they view an RV as not having substitution value in the market. So the jonestown level of re-price contract take rate in light of the backorders is not surprising.

The corporate reorganization bit is still a big wildcard here. That chapter was thin and super vague. We simply don't know what Mr. Via has up his sleeve regarding the reorganized company's final model lineup, nor the degree of legacy support going forward.

At the end of the day they do what they gotta do to remain in business. Suppose an offering drawdown/consolidation (my theory of what Via may end up enacting) is better than liquidation, but options are getting thinner, not wider in this hobby.
 
So as many know, Vans filed their reorg plan but you might not know that the US Trustee (i.e. the Department of Justice) recently filed an objection to said plan. Apparently today there was a hearing and the reorganization plan was approved by the court and the trustee withdrew their objection. This is great news for Van’s but also for the E-AB community moving forward IMO.
 
Jim_R said:
Sad as that is, the same would be true if the company folded. Either way, their stock would be worthless.
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Who takes company stock as a sole retirement source? That's slightly worse than a company managed pension... you own nothing and if the company goes bankrupt...
 
pfarber said:
Who takes company stock as a sole retirement source? That's slightly worse than a company managed pension... you own nothing and if the company goes bankrupt...
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I didn't say anything about whether that was their only retirement source.
 
StraightnLevel said:
Generally, the ESOP isn't the owner's retirement plan, except for the way in which the ESOP normally buys out the company from the owner over a pre-determined period of time. Basically, the ESOP converts the owner's equity into cash that is outside of and separate from the company and ESOP.
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And in that way, it is the owner's retirement plan.
 
hindsight2020 said:
what was the objection?
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According to a post on VAF the objections to the plan were:
(1) it holds back 20% of projected income for reinvestment of the business;
(2) only provides for payment of 55% of general unsecured creditor claim amounts over three years instead of actual disposable income and more percentage over five years; and
(3) does not provide default and remedies after confirmation
 
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