In documents obtained by Sports Executive Weekly last week, it was revealed that Airwalk International, LLC has seen its banker — and largest secured creditor — take foreclosure action against the company in an effort to recoup its losses. The skate/snowboard brands parent company, Sunrise Capital Partners, LP, is also part of the action and is partnering with the bank, Congress Financial Corporation, in an attempt to secure Airwalk free and clear of all debt.
The Supreme Court of the State of New York issued the order on November 3, 2003 and appointed a temporary receiver with the authority to “sell certain assets” of Airwalk International, LLC at public auction.
Sunrise Capital Partners, the New York-based private equity fund that bought Airwalk in 1999, has formed a new subsidiary that will attempt to purchase the assets of Airwalk for $26 million this week. The purchase offer by the new subsidiary, Collective Licensing International, LLC, is funded by the holders of “the first and second priority liens” on the assets. Those lien holders are none other than Congress and Sunrise.
The order also stipulates that holders of valid liens of record are entitled to “credit bid their liens, subject to the satisfaction, in cash or immediately available funds, of any senior liens on the Assets”.
The receiver, Abacus Advisors Group, LLC, will be accepting qualified bids until 4:00 pm on November 14, 2003. If any such bids are received, the Airwalk assets, including the Airwalk, and Genetic brands, will be sold at auction on Monday, November 17, 2003. The company also still maintains the Andy Mac footwear license in its deal with Payless.
It is expected that current senior management of Tare7, the umbrella for the Airwalk and Genetic brands, will resign from Airwalk International, LLC once the deal is consummated by the new subsidiary. Tare7 management, which includes president and CEO Bruce Pettet, sales and licensing VP Scott Cain, and product VP Eric Dreyer, will then join Collective Licensing International to run the new company.
In an exclusive interview with Sports Executive Weekly, Mr. Pettet said that the team had done all it could to keep the brand out in the marketplace, and indicated that they had closed some deals and had been working on additional licensing opportunities in the U.S. and the International market. He could not discuss those deals due to the restrictions of the foreclosure action.
Sports Executive Weekly broke the story in late May when Sunrise and Tare7 management made the strategic decision to license its brands to either another manufacturer/brand marketer or retailer. The company terminated all but a few employees, with a skeleton crew staying on through July for the transition.
“Its been a tough year,” said Pettet.
Pettet said that he and the other managers of record at Tare7 are not currently members of the new subsidiary LLC and no determination has been made on any potential equity stake for them in the new venture.
The current rumored revenue stream would not seem to justify a bid anywhere near the $26 million figure, which would seem to pave the way for Sunrise to prevail in its efforts. But some sources close to the case suggest that the company could also be forced into Chapter 11 bankruptcy by the unsecured creditors that may be none-to-happy about this latest development.
>>> If Congress and Sunrise are willing to put even more money into the company they must see some nice upside for the brands
