By Marilyn Odendahl, Truth Staff
modendahl@etruth.com
ELKHART -- Coachmen Industries is preparing to fulfill two military contracts after securing a $20 million infusion of cash from a private equity firm.
The two-year financing agreement with Miami-based H.I.G. Capital LLC, announced Wednesday, will enable Coachmen to buy the raw materials and begin building military housing units without dipping into its own cash reserves, said Rick Lavers, president and chief executive officer of Coachmen. The military contracts are worth a total of $16 million and construction could begin before the end of the year.
"We will be working on these, one way or another, into the third quarter of 2010," Lavers said, noting some laid-off workers will be recalled.
The global private equity investment firm, H.I.G., has more than $7.5 billion in equity capital under management, according to the fund's Web site. The firm has an extensive portfolio in the building products and manufacturing sectors but the deal with Coachmen is its only stake in systems-built construction.
"H.I.G. sees this as a growth opportunity," Lavers said. "Their intention is to grow the business."
More than moving forward on the military projects, Lavers believes the arrangement with H.I.G. will polish Coachmen's image among investors.
"This culminates a year of effort to secure new financing for the company and puts to rest any lingering questions about our company's financial stability," he stated in a press release.
Although Coachmen improved its performance from a $14.5 million loss in the third quarter of 2008, the manufacturer still posted a negative net income of $3.90 million for the third quarter of 2009. Revenues also dropped during the quarter to $16.1 million, down from $31.6 million in 2008.
Laver blamed the company's struggles on the tight credit markets which are preventing qualified homebuyers from getting mortgages. As an example, he pointed to Coachmen's recent experience with 50 homes that all had potential buyers, representing about $5 million in business. A majority of those factory-built houses remain with the company because the consumers were unable to get financing.
"We can't control it," Lavers said of the financing situation. "We just have to ride with it."
However with the flow of new dollars from H.I.G., Coachmen will be able to continuing weathering the economic downturn until the housing market rebounds, Lavers said. He predicted the market may need another four to nine months before any significant recovery begins.
In addition, H.I.G. funds enabled Coachmen to accept the two military contracts. The money not only boosted the amount of working cash Coachmen had available, it also convinced the bonding company to reduce the amount of collateral the manufacturer is required to front for the contracts.
Coachmen will be building barracks at Fort Bliss in Texas, according to a press release. Also the company has received a "verbal award" for a military dormitory. Some of the units will be built at the company's Iowa facility while other units may be made at operations in Colorado or Decatur, Ind.