The freezing of Yacht Path’s corporate accounts on Feb. 12 started a series of events that ended March 20 when Yacht Path filed for protection from bankruptcy under Chapter 11 of the Bankruptcy Code.
“Today is a sad day,” company President Dennis Cummings said just prior to signing the bankruptcy paperwork. “This is our lives for 13 years. But we’re not going to close our doors; we’re not going to go away.”
Under court direction, Cummings said he hopes the company can reorganize, repay its debts and creditors, and move forward.
Once the accounts were frozen, freight charges were not paid, yachts were arrested, owners paid twice to get their yachts back, people got mad.
But none of that would have happened if its accounts hadn’t been frozen, Cummings said.
“Twelve years in business and this one thing is going to force us into Chapter 11,” he said.
Making the decision to file Chapter 11 was not easy, he said, but it was defensive. Forcing his hand was the threat of an involuntary bankruptcy petition being filed against Yacht Path by Ft. Lauderdale attorney Robert McIntosh, who was accumulating clients for the petition.
“Three creditors can get together and put a company into involuntary bankruptcy,” Cummings said. “That’s Chapter 7, liquidation. We had to face a decision, Kevin and I: Chapter 7 or Chapter 11. The decision was made to reorganize.”
Doing so will release the freeze on his bank accounts, both corporate and personal, and lets the company get back to work.
His first task, he said, will be paying back clients who paid twice. Chapter 11 makes available certain financing vehicles not available to the company in other ways, including debtor-in-possession (DIP) financing.
“Through whichever tools are available to us, our first goal is to make our clients whole,” he said. “That takes cold, hard cash.”
After that, he said he wants to make sure future clients get their yachts shipped without incident.
“There’s a fundamental problem happening in the yacht transport industry, and it’s bad,” he said of the practice of a customer paying up front for the service. Instead, he plans to propose to the bankruptcy court that deposits and transport fees be placed in escrow, with the shipper being paid before Yacht Path is paid.
“This ensures a risk-free transport,” he said. “This is the way I’m going to try to come back. I want a no-risk yacht transport company. If I don’t perform, I don’t get paid.”
Yacht Path has transported about 8,000 yachts since beginning operations in 2001, he said. It saw revenues of $28 million in 2008 and as much as $30 million in 2011, he said.
He expected the bankruptcy reorganization process to take 90-120 days.
“Do Kevin and I feel obligated to make these people whole? Absolutely. Just allow me to run my business again. Free me from my handcuffs. What we have is worth saving, and the way to do that is to make good with these clients.”
Lucy Chabot Reed is editor of The Triton. Comments on this story are welcome at email@example.com.