BikeBiz Bicycle and cycling retail news
The debtor-in-possession loan is provided by CIT Group/Business Credit Inc. and noteholder Pegasus Partners.
A final hearing on the company’s loan package has been scheduled for February 25th in the US Bankruptcy Court in Bridgeport, Conneticut.
Under the financing deal, Cannondale is required to repay CIT Group $688,900 in advances made prior to its bankruptcy.
Pegasus is willing to advance Cannondale half of the money it needs to operate in connection with a budget that was worked out between Pegasus and CIT Group.
Cannondale already owes $19.5 million to CIT Group from pre-bankruptcy loans and also owes about $25 million to Pegasus in pre-petition loans.
With Pegasus as the ‘stalking horse’, other companies will be able to bid for Cannondale in a court hearing in mid-March.
Court papers said an initial deposit of $500,000 is needed to purchase all the assets – motorcycle as well as bicycle – with a total price tag of $60 million. Other parties wishing to bid on both sets of assets must start the bidding process at $250,000.
Interest in the bicycle assets alone would also require an initial deposit of $500,000, with a total price tag of $57.2 million. Other interested parties would have to start bidding at $250,000.
The motorcycle assets alone would require an initial deposit of $250,000, with a total price tag of $2.8 million. The bidding would start at $100,000.
Court papers said the bids are due by March 11 and should be sent to Cannondale’s offices in Bethel, Conn. The auction is scheduled to take place on March 13 at Cannondale in Bethel.
The proposed buyer, who isn’t identified in court documents, is requesting a breakup fee of $1.3 million if another party submits the winning bid.
Court papers also said that if the assets are sold separately, $1.2 million has been allotted for the bicycle assets and $58,500 has been allotted for the motorcycle assets.
Cannondale’s Chapter 11 petition listed $114 million in assets and $105 million in debts.
News of the Chapter 11 petition is slowly filtering out to consumers. To stem any fears that the corporation is about to disappear, Joe Montgomery, founder and president of Cannondale, wrote an open letter to "our customers; past, present and future."
"It is critical that you know that our bicycle division is not going out of business. Our goal is to preserve and strengthen our core bicycle business so that we can continue to produce innovative cycling products, just as we have throughout the duration of the motorsports project.
"For our customers and dealers, our intention is that the filing will hardly be noticed at all.
"We hope that the only difference you’ll notice will be an anticipated improvement in our performance. With our interim financing in place, we’re actually in a better position to order parts from our suppliers than we have been in recent months. As a result, we’re looking forward to smoothing out our production and delivery of bicycles. Without the distraction of motorsports, we’ll also be much more focused on bringing new, innovative technologies to market.
"Many companies that have filed for reorganization – including Harley-Davidson, Macy’s, and Toys ‘R’ Us – have strengthened their businesses and are performing very well today. We’re very hopeful and optimistic that ours will be a similar success story. In the meantime, our plan is to provide our customers and dealers with the best possible service and support."
