Introduction
This month, Bruce H. Mason, acting as creditor trustee (the “Trustee”) for the CEI Liquidation Trust (the “Liquidation Trust” or “Trust”) began filing preference actions against various defendants. As stated in the Liquidation Trust’s complaints, the Trust was created in the Champion Enterprises (aka “Champion Home Builders” or “Champion”) bankruptcy pursuant to Champion’s Second Amended Joint Plan of Liquidation. This post will look at Champion’s business, why the company filed for bankruptcy as well as some of the events that have transpired since the company entered into bankruptcy.
Background
As I discussed in a 2009 post on this blog, Champion filed for bankruptcy protection in the Delaware Bankruptcy Court on November 25, 2009. One of the first documents Champion filed with the Bankruptcy Court was the Declaration of Champion’s CFO in Support of its First Day Motions (the “Declaration”). As reflected in the Declaration, Champion builds commercial and residential modular housing throughout the United States. The company began in 1953 in Dryden, Michigan where it produced roughly two houses per week. Over the years, Champion expanded in to the production of travel trailers, campers, commercial buses and mobile homes. Decl. at *4.
Events Leading to Bankruptcy
Champion blames its bankruptcy on several factors, most noteably the decline in the housing market that began in 2007. In 2008, the U.S. housing market experienced a 41% drop in housing starts and a 38% decline in new home sales. Decl. at *16. Sales of manufactured homes are directly affected by changes in the traditional housing market. With the drop in housing, Champion saw a 33% drop in sales between 2007 and 2008. In 2008, 48% of Champion’s home sales were financed under a “floor plan” financing agreement with a national lender. However, following the tightening in credit markets in 2008, many lenders either reduced or eliminated this segment of lending. The inability to locate financing for purchasers further impacted Champion’s businesses. Decl. at **18-19.
The Bankruptcy Proceeding
Champion filed for bankruptcy in November of 2009. By March 2, 2010, substantially all of Champion’s assets were sold to “New Champion Homes, Inc.” and “Champion Enterprises Holdings, LLC.” On November 16, 2010, Champion filed with the Bankruptcy Court its Second Amended Plan of Liquidation which was approved by the Court on April 6, 2011. Once the company’s Plan became effective, the Creditor Trust was formed to liquidate estate assets. The Trustee was also charged with prosecuting and settling avoidance actions.
The Champion Homes bankruptcy proceeding, along with the preference actions commenced by the Trustee, are before the Honorable Kevin Gross. Judge Gross is Chief Judge of the Delaware Bankruptcy Court. The Trustee, as Plaintiff in the preference actions, is represented by The Rosner Law Group LLC and ASK Financial LLP.