Cannondale to file for bankruptcy
By VeloNews Interactive
This report filed January 27, 2003
The management of Cannondale has announced on Monday that they intend to file a voluntary petition
for reorganization under Chapter 11 of the U.S. Bankruptcy Code on Tuesday, January 28th.
Cannondale and its lenders have agreed to present the bankruptcy court with a tentative agreement,
which would provide the company with interim financing to fund 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 to sell nearly all of its assets to one
of its two largest creditors, Pegasus Partners. That aagreement, too, is subject to bankruptcy court
approval and could be rejected in favor of higher offers from other parties.
If approved, Pegasus would operate the bicycle business as a going concern with the involvement of
current management and would purchase separately Cannondale'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.
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," Montgomery said. "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.
Cannondale's foreign subsidiaries are not included in the filing. Business done through Cannondale
subsidiaries in Europe, Japan and Australia accounted for approximately 42 percent of the company's
total sales in fiscal 2002.
One company manager contacted by VeloNews said the company "recognizes the value of our sponsorship
programs," and said he expects those relationships to continue.
"It's a big part of what we do and what makes the bicycle business here a success," the official,
who declined to be identified, said.
Thanks, Ronde Chimp
