Palmer Johnson Gets a New Lease on Life
“We had a good week up here,” Mike Kelsey, Jr. says, with an evident smile in his voice. It’s mid-January, and Kelsey is sitting in the Sturgeon Bay, Wisconsin, office of the chairman of Palmer Johnson—the same office previously occupied by his late father, Mike Kelsey, Sr., who took the yard to world prominence. It’s surely an emotional moment for that reason, but it’s also emotional because the younger Kelsey and the man he works for, the former professional cricket player and present owner of Palmer Johnson, Timur (Tim) Mohammed, have been meeting with craftsmen of the yard and setting up a transition team to return the famed Sturgeon Bay facility to solvency.
Nearly ten months after the shipyard filed for Chapter 11 protection when creditors forced it into Chapter 7—a period in which rumors flew about the yard ceasing operations and about what Mohammed and other suitors would do with it upon acquisition—Palmer Johnson seems headed toward solid ground.
“There were a lot of people who believed in the company, but no one believed as much as Tim,” Kelsey says. He explains that since Mohammed acquired Palmer Johnson Savannah (formerly Intermarine Savannah) in Savannah, Georgia, last year, it was natural to also want to acquire the Sturgeon Bay yard, given the quality of the yachts that had been turned out of there for decades.
Under the terms of the deal, Mohammed will pay $850,000 to unsecured creditors, meaning companies to which Palmer Johnson owes money. (At presstime, in keeping with the bankruptcy process, a judge was to decide which creditors are most important to pay off. The full debt totals $5 million, according to court documents.)
Equally important is the fact that Mohammed also retains the rights to the Palmer Johnson name and trademark, which he’d acquired in February 2003 from Andrew McKelvey, the yard’s previous owner. (Mohammed had essentially gotten them in exchange for forgiving a $1-million loan he’d made to the yard in January 2003 while it was building him the 120-foot Cover Drive.) In the weeks following the bankruptcy filing, when some of the companies that Palmer Johnson owed money to learned of the transfer of the name and trademark, they questioned the timing of it. The bankruptcy examiner determined late last year that the deal between McKelvey and Mohammed was “voidable” because it favored Mohammed at other creditors’ expenses, and both McKelvey and the yard filed lawsuits against Mohammed to get it back. Mohammed, in turn, filed suit against McKelvey, saying McKelvey had declared he had the right to sell the name and trademark. All suits have since been dropped.
Mohammed had more than just lawsuits to contend with during the past several months—there were two competing bids for Palmer Johnson as well, one of which was filed by McKelvey but later withdrawn. New York investment banker Steven Rattner submitted the other bid, which included both $350,000 to pay off outstanding unsecured debt and a provision to build two yachts, one of which he’d own. However, Rattner’s bid also specified that these offers were contingent upon him acquiring the yard name and trademark. Rattner’s offer exceeded Mohammed’s, which included $250,000 to pay off debt and specified that work would begin on a spec yacht to generate more cash. Mohammed then countered with a revised plan, with $700,000 pledged to settle debt and an additional half million dollars pledged for a trust fund that would go to employees if he fails to maintain a workforce of at least 100 in Sturgeon Bay for a year.
Even with the revised plan, however, rumors dogged Mohammed. According to Kelsey, “a small but very vocal group of people” was claiming the only reason Mohammed planned to buy the Sturgeon Bay facility “would be to shut it down and transfer everything to Savannah.” The rumor “perpetuated despite my efforts to say it was the craftsmen in Sturgeon Bay that he wanted,” Kelsey states.
Indeed, court documents back him up. In Mohammed’s original bid, he pledged to ensure employees’ claims for vacation pay and medical benefits would be paid in full. And he added one more guarantee with his revised bid: to keep the facility operational for 27 months or hand the name over to the employees.
Rattner dropped his competing bid in January of this year. Kelsey says he and Mohammed are looking forward to the future and convincing potential clients that they’re committed to keeping production going in both Georgia and Wisconsin. “The place to build aluminum boats is in Sturgeon Bay, and the place to build fiberglass boats is in Savannah,” he relates. “The core craftsmen for each of those trades are located north and south.” The Savannah site will build the sleek semicustom sport-yacht series from 120 to 150 feet, designed by the famed Italian firm Nuvolari & Lenard. (Mohammed’s Cover Drive is a 120-foot version.) The Sturgeon Bay site will continue to build yachts with the traditional look Palmer Johnson became famous for as well as ones with more modern styling. In fact, when we spoke in January, Kelsey told me that Palmer Johnson expected to sign a minimum of two contracts by the summer and had both a 125-foot sport-yacht spec project as well as a 145-foot “unique concept” trideck expected to begin construction prior to that. As to that “unique concept,” Kelsey says it will combine sleek styling as well as elements that harken back to a “popular” yacht the yard delivered while his father was still chairman, though he wouldn’t elaborate.
“It feels good sitting here in Dad’s office,” he reflects. He pauses, then adds, “For me to do what Dad did, I’ve got some to learn, no doubt, but I had a great teacher.”
This article originally appeared in the March 2004 issue of Power & Motoryacht magazine.