ABOUT PHOTO: Krystal Koach’s bankruptcy reorganization will position it to successfully develop future green vehicles, such as the T.S. Luxury Electric Vehicle, an all-electric four passenger ultra-luxury sedan based on a heavily modified SUV chassis.
SUMMARY: The leading maker of stretch limousines is sold to a Hong-Kong based green vehicle products manufacturer. A Chapter 11 bankruptcy filing allows Krystal to operate as normal during the reorganization process and develop new green vehicles. The NLA President says Krystal will "change the industry forever."
[UPDATED: Tuesday, Nov. 23]
BREA, Calif. — Krystal Koach Inc., the predominant maker of chauffeured transportation vehicles worldwide, is selling its operations and assets to Hong-Kong based THUNDER SKY BATTERY LIMITED, a publicly traded maker of Lithium-Ion batteries and affiliated products for the automotive industry, and an existing investor.
As part of the strategic asset purchase agreement, Krystal Koach Inc., also known as KRYSTAL ENTERPRISES, is filing a pre-arranged voluntary Chapter 11 bankruptcy filing, the company said in a press release issued Monday morning. Krystal is expected to emerge from the Chapter 11 sale process in 60 to 75 days.
All operations — including manufacturing, sales, and warranty support — will continue to operate as usual during the reorganization, company officials said. Vehicle customers and customer service will not be affected. Also, the new venture does not change the existing model line-up of Krystal's gasoline vehicles, which will continued to be built and sold as before.
"The entire Krystal team is excited about the prospect of quickly implementing the sale through the Chapter 11 process, which will allow us to emerge within two months as a company with rock solid financial footing,” said Krystal CEO and founder, Ed Grech, in a prepared statement.
[CHAPTER 11 DEFINED: Chapter 11 bankruptcy allows a business to reorganize and refinance to be able to prevent final insolvency. Often there is no trustee, but a "debtor in possession," and considerable time to present a plan of reorganization. The final plan often requires creditors to take only a small percentage of the debts owed them or to take payment over a long period of time. Chapter 13 is similar to Chapter 11, but is for individuals to work out payment schedules. -- USLegal.com.]
As part of the bankruptcy deal, Krystal Koach Inc. is formerly entering the asset purchase agreement with the newly formed Krystal Infinity, LLC, an affiliate of Thunder Sky. Krystal has reached an agreement with its major creditor and with Thunder Sky to allow for an efficient process. Grech will remain a major shareholder and CEO after the sale. Krystal has arranged a debtor in possession financing facility with an affiliate of the purchaser to ensure that Krystal can manufacture and deliver vehicles through the sale process.
Financial terms of the deal, key creditors, and precise ownership stakes in the new venture were not disclosed.
"We will continue to pay our valued employees as well as our vendors for post-petition purchases of goods and services in the normal course of business,' Grech said. “It will be business as usual while we complete the sale transaction.
“As we emerge from the very difficult economic times that have affected our industry and country, Krystal Koach remains committed to leading the industries that we serve through quality, innovation, and the highest level of customer support," Grech said. "Krystal is and will remain open for business. We’ll continue to make and deliver the best vehicles in the industry. We are very excited about our future with our new partners."
The surprising announcement is one of the most dramatic signs yet of how the recession and shifting transportation dynamics in the U.S. are fundamentally transforming the traditional limousine industry. Krystal becomes the first major limousine manufacturer to file for bankruptcy and then continue operations, in contrast to several other coachbuilders that have either sold off their assets or simply gone out of business in recent years.
Since the recession accelerated in 2008, Krystal has had to adapt in bold ways, resorting to furloughs, layoffs, and transfer of some production to a manufacturing facility in Mexico. The company also successfully developed a hybrid mini-bus and CNG-stretch limousine in the last three years as it pursues the growing market for green vehicles.
The bankruptcy filing marks the stark end of one era for Krystal, and the start of another that will be defined by a new generation of vehicles, alternative energy technologies, and vehicle innovations.
Grech founded Krystal in his body shop in Anaheim, Calif. in 1983 after cutting and building his first stretch limousine, a 1981 Cadillac. Over the next three decades, Grech built up Krystal into the largest global maker of limousines, mini-buses, and other chauffeured vehicles. He cultivated a reputation based on quality construction, innovative amenities, high safety standards, professional sales and dealer networks, and a company image synonymous with classy, luxury stretch limousines. That was all symbolized by his modern, iconic headquarters building, showroom, and manufacturing complex that opened along East Imperial Highway in Brea in 1997.
National Limousine Association President Diane Forgy summed up on Tuesday the sentiments of many operators throughout the industry in the following statement: "These last few years have been incredibly challenging and downright devastating for the coach building industry. I have the utmost respect for Krystal’s response to these changing times both in terms of their restructuring and the new product line they are developing. What they are working on will change the industry forever. They are true innovators, trendsetters and most definitely, survivors. It will be exciting to follow their progress."
Along with the bankruptcy announcement, Krystal released a new product line-up for 2011, as part of the newly formed Krystal Infinity. It formally marks the beginning of a new phase for the company.
“Our partnership with Krystal Infinity, LLC allows us to continue our legacy of innovation by bringing the first battery powered vehicles to our market,” Grech said in the statement.
Krystal detailed the impending release of two new all-electric vehicles:
The Krystal — T.S. Luxury Electric Vehicle is an all-electric four passenger ultra-luxury sedan based on a heavily modified SUV chassis. The completely re-configured drivetrain is powered by Thunder Sky Rare Earth Lithium Ion batteries and a UQM Brushless Permanent Magnet motor. The result is a 200kW (268 Hp) rear-wheel drive system that boasts 112 kW-hrs of stored energy and a range of 180 miles at freeway speeds. This model is in the final design stages. A fully functioning prototype was successfully demonstrated and displayed earlier this month at “EVS 25”, the World Battery, Hybrid and Fuel Cell Electric Vehicle Symposium and Exhibition in Shenzhen, China. Full production is expected in first quarter 2011.
The Krystal EV Bus, now under development and slated for a mid-2011 production start, is based on the International 4000 Series chassis. This long-running Krystal favorite has been redesigned with an all-electric drive system, including two Siemens motors, a Flender Combining Gear Box, long range Thunder Sky Rare Earth Lithium Ion batteries, and the proven Carrier AdvantacTM All Electric Air Conditioner.
The 27,500-pound Krystal EV Bus will be offered with a 102-inch wide body and seating to accommodate up to 38 passengers, and the amenities Krystal’s bus customers have come to expect.
In the months ahead, Krystal will be working on refining the prototypes and developing traveling ranges for each vehicle, as well as figuring out price points for buyers, said John Beck, executive vice president of Krystal.
ABOUT THUNDER SKY
Thunder Sky Battery Limited, an investment holding company, engages in the production, sale, and distribution of electric battery products in Hong Kong and the People’s Republic of China. It also involves in the securities dealing and investment, provision of securities brokerage services, and treasury investment activities, as well as in trading general products. Thunder Sky Battery Limited was formerly known as Jia Sheng Holdings Limited and changed its name to Thunder Sky Battery Limited in May 2010. Thunder Sky Battery Limited was incorporated in 1990 and is based in Wanchai, Hong Kong. — Bloomberg/ Businessweek
The company has five segments: the securities investment segment, which includes dealings and trading of securities; the securities brokerage segment, which provides securities brokerage services; the treasury investment segment, which represents investments in cash markets, and the general trading segment, which represents trading of general products. The Company's subsidiaries include Basland Enterprises Ltd., Carico (Hong Kong) Limited, Carico Strategic Investment Ltd, China Automotive Resources Limited, China Automotive Resources Limited, Fullbelief International Limited, Full Investment Limited, Infast Brokerage Limited and Glory Era Limited. — CorporateInformation.com
THUNDER SKY TRADING INFORMATION
RELATED INDUSTRY DEVELOPMENTS
Other key developments among coachbuilders in the chauffeured transportation industry during the last year:
FEDERAL COACH SELLS DIVISIONS
DABRYAN MOVES VEHICLE PRODUCTION
ELECTRIC CAR COMPANY PARTNERS WITH POWER FIRM
Sources: Krystal Koach Inc.; Martin Romjue, LCT Magazine; LCT archives