SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 9, 2002
Champion Enterprises, Inc.
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(Exact name of Registrant as Specified in Charter)
Michigan
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(State or Other Jurisdiction of Incorporation)
1-9751 38-2743168
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(Commission File Number) (IRS Employer Identification No.)
2701 Cambridge Court, Suite 300, Auburn Hills, Michigan 48326
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 248/340-9090
ITEM 5. OTHER EVENTS.
In April 2002, the Company arranged a $150 million warehouse facility
for a consolidated third party special purpose entity to support the financing
operations of the Company's financial subsidiary. The warehouse facility has a
term of one year and contains covenants that, among other things, require
maintenance by the Company of minimum interest coverage ratios and tangible net
worth and certain minimum unsecured debt ratings from two of the national
ratings agencies.
As of August 9, 2002, the consolidated third party special purpose
entity entered into a fourth amendment to the warehouse facility to modify
various consumer loan quality and concentration parameters as well as other
terms in order to obtain the desired ratings of the facility from both Moody's
Investors Service and Standard & Poor's.
As of September 9, 2002, the consolidated third party special purpose
entity entered into a fifth amendment to the warehouse facility. This amendment,
among other things, waives an event of default pertaining to the Company's
adjusted consolidated tangible net worth covenant up to September 30, 2002;
waives the ratings trigger consequences from the Company being placed on
negative credit watch by Moody's; and reduces the loan selling price range on
the facility from 83% to 85% down to 76% to 78%. As a result, for every $10
million of loans sold into the warehouse facility, initial proceeds will be
$700,000 less than before the loan selling price range reduction.
In September 2002, Moody's placed a negative outlook on the Company's
senior implied credit rating and the ratings on the Company's senior notes due
2007 and senior notes due 2009. A negative rating action by either Moody's or
Standard & Poor's could cause a default under the warehouse facility. A negative
ratings action also could affect the Company's ability to obtain or maintain
various forms of business credit, including but not limited to letters of
credit, surety bonds, trade payables and floor plan financing, or could result
in the Company having to place additional collateral related thereto.
The Company has a $15 million floor plan financing facility that
contains a covenant requiring the Company to maintain minimum earnings before
interest, taxes, depreciation and amortization ("EBITDA"), as defined. The
Company expects not to be in compliance with this covenant for the quarter
ending September 28, 2002 and will seek an amendment to cure the noncompliance.
The Company expects to obtain this amendment by September 28, 2002. If the
Company does not obtain such amendment, the lender could terminate the credit
line and cause the debt to become immediately due and payable. As of July 31,
2002, the Company had approximately $1.7 million outstanding under this
facility.
In August 2002, the Company's largest surety bond provider notified the
Company that it is no longer willing to support the Company's surety bond needs
at the current level or terms. The related surety bonds total $20.8 million as
collateral for the Company's self-insurance program and approximately $14.2
million for general
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operating purposes. The Company has previously provided $9.6 million of cash
collateral and $3.1 million of letter of credit collateral in support of these
surety bonds. The Company has proposed a collateral increase in order to retain
these surety bond programs with the current provider. If the Company cannot
retain its current provider, it will seek alternative providers. The inability
to retain the Company's current provider or obtain alternative bonding sources
could have a negative impact on the Company's liquidity of up to $22 million.
On September 20, 2002 the Company issued a press release, which is
attached as Exhibit 99.3.
ITEM 7. EXHIBITS.
Exhibit
Number
99.1 Amendment Agreement No. 4, dated as of August 9, 2002, to the
Receivables Purchase Agreement among HomePride Finance Corp.
and GSS Homepride Corp., CIT Group/Sales Financing, Inc.,
Greenwich Funding Corp., the financial institutions named
therein as Banks and Credit Suisse First Boston, New York
Branch.
99.2 Amendment Agreement No. 5, dated as of September 9, 2002, to
the Receivables Purchase Agreement among HomePride Finance
Corp. and GSS Homepride Corp., CIT Group/Sales Financing,
Inc., Greenwich Funding Corp., the financial institutions
named therein as Banks and Credit Suisse First Boston, New
York Branch.
99.3 Press release dated September 20, 2002.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHAMPION ENTERPRISES, INC.
By: /s/ Anthony S. Cleberg
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Anthony S. Cleberg, Executive Vice
President and Chief Financial Officer
Date: September 20, 2002
INDEX TO EXHIBITS
Exhibit No. Description
99.1 Amendment Agreement No. 4, dated as of August 9, 2002, to the
Receivables Purchase Agreement among HomePride Finance Corp.
and GSS Homepride Corp., CIT Group/Sales Financing, Inc.,
Greenwich Funding Corp., the financial institutions named
therein as Banks and Credit Suisse First Boston, New York
Branch.
99.2 Amendment Agreement No. 5, dated as of September 9, 2002, to
the Receivables Purchase Agreement among HomePride Finance
Corp. and GSS Homepride Corp., CIT Group/Sales Financing,
Inc., Greenwich Funding Corp., the financial institutions
named therein as Banks and Credit Suisse First Boston, New
York Branch.
99.3 Press release dated September 20, 2002.