An Arizona boat dealership founded in Tucson is in bankruptcy after losing access to financing from a financial services arm of General Electric Co.
Arizona Discount Marine filed for Chapter 11 bankruptcy reorganization on Sunday, alleging that GE Commercial Distribution Finance Corp. hurt the company by cutting its credit line in July.
The agreement allowed Arizona Discount Marine to borrow money from GE to finance the purchase of new boats and other vehicles and to reduce those debts by turning over trade-ins to GE, bankruptcy court filings said.
Without the ability to sell the trade-ins to GE, Arizona Discount Marine suffered a "huge cash-flow shortage," said Eric Slocum Sparks, a Tucson bankruptcy attorney representing Arizona Discount Marine.
Scott Buchanan, co-owner of the dealership, said the move by GE "almost cripples me. It strips our ability to take in trade-ins, and that's a big part of our business."
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GE spokesman Stephen White would not comment on the matter. But in a court document, GE said Arizona Discount Marine was falling behind in paying off its debts.
Arizona Discount Marine has about $11 million in assets and $10.2 million in debts, including $9.5 million owed to boat financiers.
In addition to GE, the dealership uses financing from Providence, R.I.-based Textron Financial — which is still doing business with Arizona Discount Marine, Buchanan said.
Under a Chapter 11 bankruptcy, a debtor company works out a plan to repay creditors, usually while it continues to operate.
To continue doing business, Arizona Discount Marine sought permission from the court on Wednesday to use its cash for operating purposes.
GE objected to that in a court filing Wednesday, arguing that Arizona Discount Marine was selling some boats without using the proceeds to pay off financing.
But at a hastily arranged hearing Wednesday, the boat dealership was permitted to use the cash, Buchanan said.
Buchanan, his wife and other family members started Arizona Discount Marine in Tucson in 1999. The company branched out to the Phoenix area in 2004, Buchanan said.
The company's Web site lists locations at 1904 W. Prince Road in Tucson, as well as in Phoenix and Tempe. But Buchanan said he closed both the Prince Road and Tempe locations shortly after GE pulled its credit line.
Arizona Discount Marine still operates in a satellite location at East Ajo Way and South Dodge Boulevard.
Sales of boats have suffered this year as the economy has slowed, Buchanan said.
He said his sales are off by about half from last year, with the weakest sales in the lower-priced boats.
"The smaller stuff is dead, at best," he said.
The dealership also offers recreational vehicles, but those sales have been even worse this year, he said.
Elsewhere in the Phoenix area, Lynn Molinari, co-owner of Southwest Boats, said she also has noticed a drop-off in sales this year, but she has not had any problem obtaining financing.
Her dealership also uses GE, but it does not have an agreement to transfer trade-in boats to the financing agency.
"Right now it's a little tough. It's pretty slow," she said, but added: "We've never had a problem with GE."