Their are way too many companies that profit from Van's for it to just go away. If Van's comes out of this and continues to sell kits as we all know they will. They are the best total performance kits out there. Think Garmin, Dynon, Hartzell, Lycoming do you think they want all those sales to dry up. I think not they will emerge stronger and profitable. The annual price increases they used to have were behind the curve as we all know everything has had terrible inflation. Plus the primer and LCP was too much. They will survive. Yes kits will cost more but so does everything else.
Agreed, they definitely will not go away. Their name, though tarnished, and their products are the best in the industry. There is value there and when there is value, people will want and pay for it. The question is who is going to bear the costs of keeping them around and is it going to be equitable?
The way Van's survival has been proposed is for the customers to bear the whole burden. Van’s structured the bankruptcy (by using Subchapter V) so a third party can’t swoop in and buy the company. Van being the DIP lender also ensures that. That’s probably a good thing, but that also means Van controls the whole process and someone else can't come in and offer customers a better deal in exchange for buying the company.
Van/his attorneys/the new guys running Vans have made it so that the money Van previously loaned to the company and the money he will loan in bankruptcy (the amount being entirely in his discretion) will always be in a position to be repaid before the customers (including customers that put money in after the bankruptcy). So if Van doesn't lend everything the company needs, then the company liquidates, Van gets his money back (i.e., previous profits funded in part by customer deposits), and the customers lose everything (including customers that put in money after the start of the bankruptcy).
I don't think this is fair. I think he should give committed lending during the bankruptcy (or find someone that will, since that is the way it is normally done) and I think he should be subordinate to the rights of customers that make deposits after the start of the bankruptcy. He should also have to propose a plan that makes pre-bankruptcy creditors whole over a period of time. To give customers comfort dealing with a bankrupt company, he should also have to escrow the new customer payments until the goods ship and support the company's cashflow needs with his DIP facility in the meantime. Escrowing new payments will ensure that customers will get their money back if the company liquidates before shipping their goods.
I disagree with the excuse that the company didn’t keep up with inflation. They raised their prices 30%+ over the last few years and their financials show multimillion dollar profits over the last several years. Those profits should have remained in the company and been subordinate to customer deposits, but Van and/or the employee owners pulled all the profits out of the business (which is why they have very little retained earnings on their financial statements). He's now loaning those profits back to the company on a secured basis. Keep in mind that the priority in bankruptcy is secured creditors > customers > ownership. So he moved his money from a subordinate ownership position to the highest priority secured creditor position, elevating his rights in the company's money over the rights of the customers that gave the company that money.
Getting back to the cause of the bankruptcy, based on the bankruptcy filings, the problem that lead to bankruptcy seems to be mainly that they failed to do quality control and shipped millions of dollars of defective LCPs. They couldn't get their LCP vendor and/or insurance carrier to cover the loss nor could they get their customers to find the parts acceptable and forget what Van's has been saying for decades about cracks. They are estimating the cost of remediating the LCP loss at $5M. They put that estimated loss as a reserve on their balance sheet and that is most of the reason they are insolvent on the balance sheet.
The bankruptcy was the only way they could force a price increase on the customers so that the owners wouldn't have to put more capital into the business as equity and risk that capital being subordinated to the rights of their customers. It's easier to force someone else to lose their money so you can keep your own. This is pretty typical in business, but I leave it to you all to decide whether it is right. As I've said before, I believe that Van is a good guy and only hope that he will use the power he has in this process and the money we have all made him to make sure the customers are taken care of in the best way possible.
