Pacific Cycle increased its bid to buy Iron Horse Bicycle Co. — which is reorganizing in bankruptcy proceedings — to $2.7 million. With another bid already in from Outdoor Cycle Group, an auction to entertain all bids for the bicycle manufacturer is now set for mid-July. The bid would include all trademarks owned by Iron Horse as well as substantially all assets, including customer lists, Internet websites/domain names and inventory.
At a court hearing last Monday, a lawyer representing CIT Group, which is Iron Horse's secured lender, said the new offer from Pacific Cycle consists of $2.25 million in cash and a $500,000 note. In May, Pacific Cycle offered $2 million in cash for the brands intellectual property, inventory and other assets. Among Pacific Cycle's bike brands are Schwinn and Mongoose as well as the InStep jogging stroller.
Outdoor Cycle, which is owned by Randall Scott –son of former Iron Horse president Cliff Weidberg — has bid $800,000 in cash, a three-year note worth $1.2 million and a percentage of royalties from licensing the Iron Horse trademark over the next five years. The note is guaranteed by Rand International, a wholesale distributor of sporting goods.
The bankruptcy judge overseeing the case also this week moved up the deadline for bids for the auction to July 10 and set the auction for July 13.
Iron Horse's troubles began in 2008 when a deteriorating financial condition led the company to change its management, decrease its workforce to one manager and sell portions of its inventory to pay down debt to its factor, CIT. Court papers noted that at the time, it had spoken to five potential purchasers regarding a possible sale: Dick's Sporting Goods, The Sports Authority, Wal-Mart, Forzani and Performance Inc. The company also entered into serious discussions with two purchasers Randall Scott, Weinberg and Jeffrey Bruno but the deals were never consummated. Just before the move into bankruptcy court, Dorel Industries made an offer to CIT for the purchase of the inventory and trade name.
On March 2 of this year, three of Iron Horses Asian factories filed an involuntary petition for bankruptcy in an attempt to recoup $5 million that was apparently owed to them by the bicycle company. In April, the case was converted to a Chapter 11 petition. Iron Horse Bicycle Company owes more than $17.1 million to dozens of unsecured creditors, including about $11.5 million to various Asian bicycle suppliers.
Although the Iron Horse trademark and inventory are the main assets being sold, a lawyer for the debtor said the inventory acquired in the sales auction may include any remaining bikes made through licenses under the Columbia, K2 and Jeep names.
