JANUARY 27, 2003 -- BETHEL, CT (BRAIN)--Cannondale officials will file a petition Tuesday Jan. 28 to reorganize under Chapter 11 of the U.S. bankruptcy code. The plan is subject to bankruptcy court approval, which is expected to come shortly after the filing is made.
As part of the plan, Pegasus Partners, one of Cannondale's creditors, will acquire all the bike and motorcycle maker's assets, including intellectual property, manufacturing facilities, inventory and subsidiaries in Japan, Australia and the Netherlands. Pegasus lent the company $25 million last summer.
Cannondale and its lenders continue, however, to look for buyers for either or both of the businesses.
Pegasus' acquisition is pursuant to Section 363 of the bankruptcy code, and subject to court approval. The acquisition is essentially a stalking-horse move. Another company, or companies, could make a higher offer and acquire the company.
Until that time, however, Pegasus plans to run the bicycle business with the current management team. Most of Cannondale's upper management, including its vice presidents, plan to stick around. All declined the retention bonuses Pegasus offered them to stay. Accepting the money would have meant deeper cuts in staff.
Bill Luca, Cannondale's vice president of finance, is one executive who will not stick with the company. He resigned from the Cannondale last week. His replacement will be named once the company's plan for reorganization is approved.
Pegasus and CIT/Business Credit, the company's other lender, will provide the company with financing to fund operations, allowing it to meet financial commitments to its suppliers and employees, as well as to pay vendors for goods and services received after the filing.
Despite reports to the contrary, Cannondale did not lock the doors on its bike factory last week. "We never stopped shipping bikes we had in stock," said Scott Montgomery, Cannondale's vice president of marketing. "Our vendors have been working with us. We never stopped dealer service, warranty, spare parts or any aspect of service."
The company stopped building new bikes, however, after it furloughed 500 factory workers in late December.
Though Cannondale will resume bike production after the courts approve its plan for reorganization, motorcycle production has been shut down, pending a potential sale. The company has been trying to sell the motorsports for months.
"The motorsports division was threatening the bicycle division," said Joe Montgomery Cannondale's founder and president.
"Although we believe in the value of our motorsports products, we didn't have sufficient financial resources to make the additional investments necessary. We look forward to bringing a renewed focus to our bicycle business and to working through this challenge with the greatest possible speed," he added.
Workers furloughed from the motorsports factory in December will not be recalled. Furloughed workers at the bicycle factory, however, are scheduled to return to work as soon as the plan for reorganization receives approval.
Cannondale's foreign subsidiaries aren't included in the filing, but are part of Pegasus' acquisition. The subsidiaries accounted for approximately 42 percent of the company
As part of the plan, Pegasus Partners, one of Cannondale's creditors, will acquire all the bike and motorcycle maker's assets, including intellectual property, manufacturing facilities, inventory and subsidiaries in Japan, Australia and the Netherlands. Pegasus lent the company $25 million last summer.
Cannondale and its lenders continue, however, to look for buyers for either or both of the businesses.
Pegasus' acquisition is pursuant to Section 363 of the bankruptcy code, and subject to court approval. The acquisition is essentially a stalking-horse move. Another company, or companies, could make a higher offer and acquire the company.
Until that time, however, Pegasus plans to run the bicycle business with the current management team. Most of Cannondale's upper management, including its vice presidents, plan to stick around. All declined the retention bonuses Pegasus offered them to stay. Accepting the money would have meant deeper cuts in staff.
Bill Luca, Cannondale's vice president of finance, is one executive who will not stick with the company. He resigned from the Cannondale last week. His replacement will be named once the company's plan for reorganization is approved.
Pegasus and CIT/Business Credit, the company's other lender, will provide the company with financing to fund operations, allowing it to meet financial commitments to its suppliers and employees, as well as to pay vendors for goods and services received after the filing.
Despite reports to the contrary, Cannondale did not lock the doors on its bike factory last week. "We never stopped shipping bikes we had in stock," said Scott Montgomery, Cannondale's vice president of marketing. "Our vendors have been working with us. We never stopped dealer service, warranty, spare parts or any aspect of service."
The company stopped building new bikes, however, after it furloughed 500 factory workers in late December.
Though Cannondale will resume bike production after the courts approve its plan for reorganization, motorcycle production has been shut down, pending a potential sale. The company has been trying to sell the motorsports for months.
"The motorsports division was threatening the bicycle division," said Joe Montgomery Cannondale's founder and president.
"Although we believe in the value of our motorsports products, we didn't have sufficient financial resources to make the additional investments necessary. We look forward to bringing a renewed focus to our bicycle business and to working through this challenge with the greatest possible speed," he added.
Workers furloughed from the motorsports factory in December will not be recalled. Furloughed workers at the bicycle factory, however, are scheduled to return to work as soon as the plan for reorganization receives approval.
Cannondale's foreign subsidiaries aren't included in the filing, but are part of Pegasus' acquisition. The subsidiaries accounted for approximately 42 percent of the company