NEARLY A YEAR after acquiring American IronHorse from the depths of insolvency, the company’s new owner has entered into bankruptcy protection, but has plans to emerge as a smaller, more tightly run business.
A large chunk of the beleaguered custom V-twin company’s inventory of new and used bikes, manufacturing equipment, spare parts, warehousing hardware and office items went on the auction block in July. Proceeds from the liquidation will go toward paying off $5.8 million owed to Textron Financial, which helped finance owner Scott Meyers’ acquisition of the Texas-based company (read about it here) in June 2008.
Faced with the mounting Textron debt, as well as money owed to a list of creditors that includes legal fees for the law firm that represented Meyers during the acquisition and property taxes to the City of Fort Worth, Meyers filed Chapter 11 in April. In court filings, the company’s debts are estimated to be between $10 million and $50 million.
Meyers, a former aerospace executive, told Dealernews that the bankruptcy will allow the company to trim some of its massive overhead, eliminate unused inventory and equipment, pay off creditors, move out of its existing building and reorganize into a smaller, more tightly run operation. “We do have very good plans to reorganize and continue the manufacturing of what we consider to be some of the best motorcycles out there,” says Meyers, who moved to Texas from Montana where he owned an IronHorse dealership.
The company’s COO, Jeff Long, adds that the company has long-term plans to continue building bikes by using components from outside vendors rather than try to manufacturer most of each bike in-house. “We’ll start off small,” Long says. “We’re going to continue to do R&D on bikes and get them out in front of the public and see what the public is interested in.” The company will be ready when the industry bounces back, Long adds.
Before the bankruptcy filing, American IronHorse Acquisitions sued Textron, claiming that it was selling a supply of repossessed bikes directly to American IronHorse dealerships. The suit also names Renegade Motorcycles, a Texas dealership formerly known as Iron Horse of Texas, claiming the store breached its dealer agreement with the company.
Meyers adds that the bankruptcy is the result of Textron pulling out of a five-year loan agreement, thereby leaving IronHorse with no way to finance its operations. This is in addition to the charges that Textron flooded the market with severely undervalued motorcycles.
Textron, which financed Meyers’ acquisition of the brand and equipment for $6.7 million, is claiming in legal filings that AIHA has failed to make payments on the loan and that the inventory up for auction is only worth $3.1 million, not the $7 million claimed by IronHorse. Textron also claims that the manufacturer has only sold six motorcycles since Jan. 1, 2009, and that it has “stopped manufacturing motorcycles and has otherwise virtually ceased operations.”
According to court paperwork, there are 15 American IronHorse dealers and 40 service centers that sell or provide service.