Cannondale announced that on March 28, 2003 the U.S. Bankruptcy Court for the District of Connecticut (Bridgeport Division) approved the Asset Purchase Agreement by and between Cannondale and Pegasus Partners II, L.P. Pursuant to the terms of the Asset Purchase Agreement, substantially all of Cannondale’s assets, including the Company’s bicycle and motorsports divisions are to be purchased by affiliates of Pegasus.
The sales of the assets of both divisions were conducted pursuant to an auction under Section 363 of the United States Bankruptcy Code and will be sold free and clear of all liens, claims, interests and encumbrances. The Company anticipates closing the asset purchases prior to the end of April 2003.
Cannondale filed a voluntary petition for chapter 11 bankruptcy protection on January 29, 2003. Cannondale’s largest secured creditor, Pegasus had agreed in late January to act as the “stalking horse” bidder in the sale. At that time, Pegasus stated its commitment to working with current management and operating the bicycle business as a going concern. Pegasus has indicated that it does not intend to operate the motorsports division.
Based on the terms of the Asset Purchase Agreement, the Company believes that there will be insufficient funds from the proceeds of the asset sale to fully satisfy the claims of its creditors. Accordingly, Cannondale also believes that its equity has no value and that its existing stockholders will not receive any distributions on account of their shares of common stock in connection with the resolution of the bankruptcy case.