The story below was posted on cyclingnews.com a few minutes ago.
Cannondale file for bankruptcy
The Cannondale Corporation has announced that it will file for bankruptcy on January 28 under Chapter 11 of the U.S. Bankruptcy Code. The bicycle and motorsports company issued a press release stating that "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, subject to better and higher offers and court approval. Pegasus would operate the bicycle business 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."
Cannondale stated that due to the interim financing, it will "be able to pay vendors for goods and services received after the filing in the ordinary course of business."
The main reason for the company filing for bankruptcy was due to the losses incurred by its motorsports division. Although the bicycle business was still profitable, the company's huge investment into motorcycles, combined with its lack of success competing against the established Japanese giants was too much.
"Although we believe in the value of our motorsports products, we did not have sufficient financial resources to make the additional investments necessary," said Montgomery. "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."
It's expected that while production workers who were laid off from Cannondale's motorsports factory in Bedford, Pennsylvania in December will not be recalled, production workers at Cannondale's Bedford bicycle factory, were temporarily suspended from work, are scheduled to return to work in the near future.
The company's foreign subsidiaries will not be 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 the 2002 fiscal year.
