The U.S. Bankruptcy Court in Denver, Colorado, ruled that Airwalk International, LLC’s senior secured lender, Congress Financial Corporation, may continue with its filed action against the company to cause the foreclosure and sale of the company’s assets encumbered by the lender’s lien.

The company’s junior secured lender, Sunrise Capital Partners, has announced its intentions to purchase the collateral from the court and begin operating the Airwalk brand through Collective Licensing International, LLC, one of its subsidiaries. Several members of the company’s senior management team, including president and CEO, Bruce Pettet, are expected to resign from the company to join the new enterprise in its efforts to develop and grow the Airwalk brand.

The foreclosure suit was delayed due to a petition filed on Nov. 13, 2003 by a Korean factory agent, ASE Industries; and two Chinese factories, Suzhou Hae Kang Shoes and Mikeda Sports Commodities Co.

The U.S. Bankruptcy Court’s order granting relief from stay reported on December 11, 2003, “There is no evidence before this Court to compel the conclusion that these creditors were victims of trickery, deceit or inequitable conduct”. The order also stated, “The harm to the objecting creditors was, in some respects, self-inflicted. These creditors gambled on Airwalk’s continued viability. While, in this instance, it turned out badly, it may just as well have turned out differently and to the creditors’ advantage. That is the nature of conducting business in a free economy. The point is that they gambled with adequate information normally available to creditors”.

The U.S. Bankruptcy Court order continues with, “The upshot of the foreclosure will be that the new company will now own the former Airwalk assets unburdened by Airwalk’s debt”.

“Airwalk is an outstanding brand which will provide incredible value to existing and future licensees,” said Pettet. “We are excited about the Court’s ruling and the opportunity for the brand to move forward.”