Ever wonder how a multi-million-dollar company is auctioned off in a bankruptcy? Is it like a Barrett-Jackson auto show with high-paced auction calling? Is it more a gentleman's game of poker?

Although it's impossible to gauge the actual atmosphere of the recent Genmar bankruptcy auction, the official transcript of the auction provides an interesting look at how everything went down last week at the Houlihan Lokey offices in Minneapolis, Minn. (Thursday and Friday, Jan. 7–8.)

What follows are highlights of the auction proceedings.



Day 1

Inside the office where the auction was held, each qualified bidder had a table, as well as a separate room in which to confer, if such a room was requested.

The parties were all asked to wear nametags so that attendees could be qualified and accounted for. Interestingly, media was not permitted inside the auction and a Houlihan official made the decision not to permit the Minneapolis Star-Tribune to witness the proceedings.

Although not everyone in attendance was introduced, attention was given to announcing the presence of Genmar president and CEO Roger Cloutier, Genmar VP and CFO David Huls, plus David Steichen of the Manchester team that oversaw Genmar through the bankruptcy.

Representatives of creditors Wells Fargo, GE Finance and Textron, as well as the Official Committee of Unsecured Creditors, were announced as a group, but not by name.

After some additional preliminaries and introductions, bidding opened for the core assets of Genmar, with representatives from two parties bidding – Platinum Equity (via its Project Boat Holdings division) and the Gores Group (via its Gores Boat Holdings division).

The bidding opened with Gores as the prevailing bid – presumably, the firm topped the stalking-horse bid prior to the auction. The Gores prevailing bid was $46,250,000. The original stalking-horse bid was $55 million, but liabilities were likely not set against that bid value.

Platinum then waived the GE core financing condition of the purchase agreement, as well as the COBRA healthcare refund and some lien covenants. That revised bid was then recognized as the prevailing bid (approximately $47 million).

Gores then broke to discuss the revised Platinum bid, but not before stating its concern for what it felt was collusion between former Genmar chairman CEO Irwin Jacobs and Platinum. Specifically, Gores referenced as worrisome the "Larson Glastron" agreement that "prohibits either Platinum or Jacobs from collaborating with other bidders."



Gores expressed its hope that all facets of the auction process and bids would be transparent, and stated its belief that the process would be more fair if Jacobs was "willing to negotiate in good faith a similar arrangement with all bidders from the core assets, not just Platinum."

Remember that VEC technology, controlled by Jacobs, was not part of the bankruptcy, and several boat brands including Larson and Glastron rely on that technology for production.

Gores noted that the firm "reached out to Jacobs," but Jacobs "appeared either unwilling or unable to meet."

After a 30-minute recess, Gores bid an additional $5 million on the condition that it "be able to have conversations with both Platinum and Jacobs regarding partnership."

After several hours that included a recess and an off-the-record discussion among creditors, the auction went back on the record. The unsecured creditors, including Textron Financial, supported Gores talking to Jacobs, but objected to Gores talking with Platinum.

After another 2-hour recess, the Gores bid of $51,250,000 was recognized as the prevailing bid.

Platinum then upped its bid to $62 million, with additional brands included such as Triumph.

A reference was made to a J&D Acquisitions bid (Jacobs) for the core assets of Genmar, so Jacobs did submit some bid, but the terms or value weren't discussed. There was clarification, however, that Platinum's bid was not a partnership bid with Jacobs.

After a 2-plus-hour break, Platinum's $62 million bid was recognized as the prevailing bid.

There was then quite a bit of confusion among those bidding for Hydra-Sport and the Yacht Group as to what brands were within the Platinum bid, and which weren't, as well as how the brands were valued relative to the bid.

There was another recess and the auction reconvened at 12:25 a.m. to announce adjournment until the following morning. As well, line-item detail was promised to help value assets outside the core (namely the Yacht Group and Hydra-Sport).

The day ended with a final value of Platinum's prevailing bid set at $63.1 million.

Day 2

The auction began again at 10:45 a.m. the next day with confirmation that Platinum would release the Yacht Group and Hydra-Sport for independent, separate bids.

Bidding for the Yacht Group then opened, as Gores was still working out details of a potentially better bid.

An offer from Patriarch was considered the prevailing bid for the Yacht Group, valued at $3.5 million.

Jacobs, on behalf of J&D Acquisitions, then upped to bid to $4.3 million by increasing the cash component.

Bidding at 10% increments, Patriarch increased its bid by $350,000, after which the bidding between the two parties increased to $6,050,000.

After a brief recess, Patriarch matched the Jacobs bid and asked that it be recognized as the prevailing bid, since "it's one pool of money" that's "separate and distinct from any other claims any other constituency would have." In other words, Patriarch felt it would provide the best value to the Genmar estate because several unsecured creditors would no doubt try to recoup lost monies from Jacobs.

However, Houlihan declared the Jacobs bid as the prevailing bid based on the fact that Patriarch did not overbid by the required $350,000 increment. Patriarch chose to stay its bid and argue its position in court at the sales approval meeting, which began yesterday.

Next came the Hydra-Sport bid, which was uncontested and awarded to Wayzata Hydra Boat for $1 million.

The auction then moved to finalize the prevailing bid for Genmar's core assets.

The floor went to Gores, and the company said it could not submit an additional bid without seeing the revised advance purchase agreement (APA) from Platinum.

Platinum argued that its bid details had been on the table for a day, that it provided Gores with a revised APA that morning, and several due-diligence questions from Gores remained unanswered on the Gores bid. In short, Platinum argued that Gores hadn't done its research and was out of time.

Gores countered by offering to increase the bid only if it could co-invest with other bidders and that the creditors agree not to object to the sale.

Gores was asked what specific parties it wished to co-invest with, but would not elaborate.

During an off-the-record recess, the creditors declined to agree to the conditions of an increased Gores bid. The auction was reconvened and Gores was notified that the creditors declined the conditions. Gores opted not to submit an increased bid and Platinum's bid was thus recognized as the highest and best.

The auction ended at 2:00 p.m. CST.