|Cannondale Corporation, has announced that it intends to file a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code on January 28th. |
Cannondale and its lenders, The CIT/Business Credit, Inc. and Pegasus Partners II, L.P. have reached an agreement in principle that, subject to Bankruptcy Court approval, will provide the Company with interim financing to fund post-petition operating expenses and to meet supplier and employee commitments. "The interim financing will be used to continue the operation of our bicycle business," said Cannondale Founder and President Joe Montgomery.
Cannondale has also reached an agreement in principle with Pegasus Partners II, L.P. to sell substantially all of its assets to Pegasus Partners II, L.P. pursuant to Section 363 of the Bankruptcy Code, subject to better and higher offers and court approval. Pegasus would operate the bicycle business as a going concern with the involvement of current management and would purchase separately the Company's motorsports assets, including the intellectual property related to the design of Cannondale's motorsports products. In the meantime, management continues to work with other potential interested buyers for either or both of these businesses.
Because the Company has obtained interim post-petition financing, Cannondale will be able to pay vendors for goods and services received after the filing in the ordinary course of business.
Montgomery explained that difficulties with Cannondale's motorsports business made the filing necessary, and that the Company has determined to suspend operations of the motorsports division pending a potential sale. "The motorsports division was threatening the bicycle division," explained Montgomery. "Although we believe in the value of our motorsports products, we did not have sufficient financial resources to make the additional investments necessary. We look forward to bringing a renewed focus to our core bicycle business and to working through this present challenge with the greatest possible speed."
The suspension of operations of the motorsports division will mean that production workers who had been furloughed from Cannondale's motorsports factory in Bedford, Pennsylvania in December will not be recalled. Production workers at Cannondale's Bedford bicycle factory, who have been idled during a recent shutdown, are scheduled to return to work in the near future.
The Company's foreign subsidiaries are not included in the filing. Business done through Cannondale subsidiaries in Europe, Japan and Australia accounted for approximately 42% of the Company's total sales in fiscal 2002.www.canondale.com