Wednesday, November 19, 1997
Egg Harbor Yacht company folds amid sea of red ink; 130 are laid off
By WILLIAM EHART
EGG HARBOR CITY -- Factory workers and even executives at Egg Harbor Yacht here have been left shaking their heads in shock and sadness at the company's failure.
Taxpayers, too, may have some questions.
With encouragement from area and state politicians, the U.S. Department of Housing and Urban Development gave Egg Harbor Yacht a $3 million loan in 1993.
The loan has not been repaid.
Two former executives at the boat-building company confirmed Tuesday that the production plant at Philadelphia Avenue and Duerer Street closed Friday.
All of the company's 130 employees -- including the executives -- were laid off.
"We are closed," former Chief Financial Officer Marita Bevans confirmed as she answered the door at the plant Tuesday.
Asked if the company hoped to resume production, Bevans said, "We're just negotiating right now (with lenders). We have some legal matters we're discussing. We are not in bankruptcy."
Bevans directed further inquiries to former Senior Vice President of Marketing Mark Sweeney, who worked from the company's sales office in Pompano, Florida
"It's a tragedy," said Sweeney, reached as he was closing the Florida office Tuesday afternoon.
"I've been in this industry a long time," Sweeney said. "And looking at our employees, our dealers and our customers, that's what makes this a tragedy. It's going to affect a lot of people."
The factory workers and other employees "were good people, and I would work with them again under different ownership," Sweeney said.
The company's former CEO and its majority shareholder "have elected to return to Texas and not be in the boat business," he said.
Sweeney also noted that the two men, with oil industry backgrounds, had lost millions.
The majority owner, Paul Frame of Houston, "personally got us through payroll a week ago," Sweeney said.
Frame is the CEO of Seitel, a petroleum-services company based in Houston. He was a passive investor in Egg Harbor Yacht.
Frame had just won majority control of the failed company on Nov. 7.
"As I understand it, (HUD) swooped in (Tuesday) morning," Sweeney said. "They have taken control of the building and its contents."
Rose Smith, a spokeswoman for the New Jersey Economic Development Authority, which arranged the HUD loan, said the federal agency is still owed the balance of its $3 million loan.
Spokespeople for HUD could not be reached for comment.
Smith also said a representative of the EDA was among those negotiating the disposition of Egg Harbor Yacht's assets Tuesday.
There are about seven yachts under construction inside the building, Sweeney said.
Those furthest along will be completed and sold because lenders had advanced the company money to build them, he said.
"They will hire some of the people back to finish those boats, but it may not be in that facility," Sweeney said.
Each yacht is reportedly worth between $200,000 and $1 million.
"My feeling personally was that we had turned the corner, particularly from a sales and marketing standpoint. Our product was well-accepted by the public, the name was back in business" Sweeney said.
"But we just couldn't overcome the sins of the past," he added.
A group called Marine Acquisitions acquired the company 18 months ago for all debt and no equity, according to Sweeney.
The level of debt turned out to be so high the company couldn't continue operations -- even though it had orders for more than 18 boats, he said.
Egg Harbor Yacht's debts are approximately $10 million, Sweeney said.
Just 11 days ago, Sweeney, who was based in Pompano, had told The Press that the company had resolved its financial difficulties and was "off and running" with a surge of new orders.
Last week, while visiting the company's headquarters here and going through the books with Frame, the two men realized the company was sunk, Sweeney said Tuesday.
He said he had been preparing to take over management of the company from CEO Rick Trapp, and was house-hunting in the area last week.
"By the time both Paul (Frame) and I took a look at this thing a week ago, we tried to make it work, and by Friday, it just wasn't there," said Sweeney, his voice heavy with emotion.
He said Frame, along with Trapp, was one of the investors behind Marine Acquisitions when it bought Egg Harbor Yacht in April 1996.
Frame lost at least $3 million in the company and may be responsible for much more of its debt, Sweeney said.
Frame, kept the company afloat in recent weeks out of his own pocket, and covered the firm's payroll on Friday, Sweeney said.
"The workers all got paid for every dime they were owed," he said.
Frame did not return calls to his Houston office seeking comment this week.
Egg Harbor Yacht, founded in 1946, was supposed to be part of the proud tale of the rebirth of New Jersey's boat-building industry since the repeal of the federal luxury tax in 1993.
But the company went through a succession of ownership and management changes during and after its emergence from Chapter 11 bankruptcy protection in 1992.
The company and other area boat builders lobbied intensely for state loans to get them on their feet again.
At one point, the Casino Reinvestment Development Authority considered a loan for Egg Harbor Yacht, but eventually determined that the circumstances were too risky.
In 1993, New Jersey became one of the first states to obtain HUD funding on behalf of its industries under the recently expanded federal Section 108 loan program.
The program was designed to provide jobs for low- and moderate-income workers in rural and small communities.
Egg Harbor Yacht was one of the first companies to apply for such a loan.