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Fleetwood Files for Chapter 11 Bankruptcy

Originally Published in MotorHome Magazine

Fleetwood Enterprises Inc. today (March 10) filed voluntary Chapter 11
petitions for itself and certain operating subsidiaries in the U.S.
Bankruptcy Court for the Central District of California in Riverside,
Calif. The filings do not include any of the company’s foreign or
non-operating entities.

According to a press release, Fleetwood’s motorhome and
manufactured housing businesses will continue to operate while the
company seeks buyers for these business units. While the Riverside,
Calif.-based company believes it has sufficient cash to operate its
businesses in the immediate term, Fleetwood is also in advanced
discussions with its senior secured lenders for new,
debtor-in-possession (DIP) financing to supplement existing working

As of Jan. 25, the company had bank cash of approximately $23
million, excluding cash remaining in non-filing entities, principally
its captive insurance subsidiary.

Filing at this time preserves Fleetwood’s right to revisit its
Dec. 12, 2008, exchange offer, in which the company issued its 14%
senior secured notes. Under Chapter 11, the company has a 90-day period
from the offer’s effective date in which to revisit the terms and that
period will expire shortly. Terms of the senior notes effectively
restricted the company from seeking investment in its businesses in view
of subsequent deterioration in the market.

The filing also facilitates the closing of Fleetwood’s travel
trailer division, which the company has commenced. This division
accounted for losses of $65.3 million in 2007 and $16.8 million in 2008.
The division closing affects three manufacturing facilities and two
service facilities employing approximately 675 people. The company is
also laying off an additional 65 corporate associates.

“Although we made substantial progress in restructuring this
division and improved the product offering, current market conditions
proved too severe to continue the turnaround,” stated Elden L. Smith,
Fleetwood’s president and chief executive officer. “We appreciate the
past support of the travel trailer dealers and our associates.”

Today’s events follow three years of restructuring that
management undertook in the face of worsening market conditions and,
more recently, unprecedented credit restrictions affecting both dealers
and customers. Management’s actions included selling two non-core
businesses, restructuring and decentralizing operations, reducing
headcount companywide by more than 70%, and adding new distribution
points and a modular division. Despite these efforts, however,
management determined that a court reorganization would offer the best
means of addressing the company’s existing debt structure and ongoing
losses in travel trailers, which cannot be supported in the current

“We will use the Chapter 11 process to more rapidly restructure
our overhead, pursue potential buyers, and definitively resolve our
debt issues,” Smith said. “Fleetwood is one of the most widely
recognized names in our industries, with strong market share, an
extensive dealer network and enthusiastic customer support. As important
as these assets are, we must take additional steps in response to
today’s deepening economic challenges.

“We appreciate the support of our loyal dealers and customers.
We want to assure them that we intend to continue doing business in
motorhomes and manufactured housing while we complete the processes
before us. We will work with our dealers to support the continued sales
of Fleetwood motorhomes and manufactured homes.”

Smith went on to say that “The RV industry has sound long-term
prospects, as RVers remain faithful to the lifestyle, and we anticipate a
strong rebound when the financing environment stabilizes and consumer
confidence improves. In our manufactured housing business, we see growth
opportunities that arise from positive demographic trends, the growing
need for affordable housing in this country, and commercial modular
applications, particularly for the military which represents an
important segment of our market. We will be able to compete more
effectively now that financing advantages of site-built homes over
manufactured homes have narrowed. We are taking steps to ensure our
businesses will be ready when the current markets turn up again.”

Fleetwood has filed first-day motions that ask the court to
approve, among other things, payment of employee wage and benefit
charges that were incurred before the petition was filed, and the
continuation of certain sales incentive programs, warranty service, cash
collateral, and cash management systems. The company is working with
its largest national lender, Bank of America, to continue to provide
competitive RV dealer and consumer financing during the reorganization

“The vast majority of our suppliers and dealers should see no
disruption in our business,” Smith said. “We will continue to support
our current and future product development and manufacturing.”

The company’s consolidated balance sheet as of Oct. 26. 2008,
showed assets of $558.3 million and liabilities of $518 million. For the
last fiscal year, the company showed annual revenues of approximately
$1.7 billion. At the time of the filing, there were no defaults and no
outstanding borrowings on the company’s secured credit facility other
than $61.7 million of undrawn letters of credit to support the company’s
performance of certain contracts and obligations. In addition, the
company had structured debt consisting of $81.4 million in aggregate
principal amount of the 14% senior secured notes and $151.3 million of
6% trust preferred securities, respectively.”

The company expects to incorporate the impact of the filing on
its fiscal third quarter results and file its Form 10Q as soon as it is

Fleetwood is being advised by its legal counsel, Gibson Dunn
& Crutcher LLP; its investment banker, Greenhill & Co. LLC; and
its financial advisor, FTI Consulting Inc.

Founded in 1950, Fleetwood continues to employ more than 3,000 people in 15 plants located in 10 states.

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