“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.