An Arizona bank has filed an objection to the proposed sale of now-bankrupt Titan Motorcycle Co.'s assets to Arizona Motorcycle Works for $300,000.
In papers filed Aug. 27 in U.S. Bankruptcy Court for the district of Arizona, First National Bank of Arizona claims it has a first rights lien on Titan's assets and that the sale price undervalues the fair market value of the property.
The bank also claims that Titan's owner Donn Proudfoot and Hope Smith, a principal in Arizona Motorcycle Works, have a personal relationship and that the latter company is subtenant of Titan's and that this relationship has not been disclosed. These two allegations call into question that "the proposed sale represents a good-faith, arms-length negotiation" between the two entities, the complaint claims.
The business is a custom bike shop that specializes in Titan repair and service. It's near Titan's building in Phoenix.
FNBA states that Proudfoots' company, TMC Acquisitions, owes the bank about $813,000 on a $1.5 million business loan that the company took out in February 2006. "The amount due and owing to FNBA is substantially above" the sale price, the bank claims.
The bank says that business loan was secured with TMC's property, which includes inventory, accounts, equipment, the Manufacturer's Statement of Origin for Titan's motorcycles, listed as collateral.
"Arguably, the assets no longer belong to the debtor or the estate are not subject to any potential sale to AMW, or any other prospective purchase," lawyers for FNBA claim.
Titan did not make efforts to encourage buyers other than Arizona Motorcycle Works and bidding requirements the company proposed discouraged other buyers, the complaint alleges.
Proudfoot and his attorney could not be reached for comment. Calls to various extensions at Arizona Motorcycle Works were routed directly to voicemail and several messages left were not returned.
The court had scheduled an Aug. 28 hearing for the proposed sale that would have included all motorcycles, machinery, equipment, fixtures, tooling, as well as all dealer agreements, transferable permits issued by the government, federal and state VINs, all intellectual property, domain names and websites.
Proudfoot originally filed for Chapter 11 protection in January. At the time, listed among the company's top 20 creditors were S&S Cycle, for about $83,000; Daytec Center, for $56,178; SuperTrapp Industries for $36,830; and Mid-USA Motorcycle Parts for $19,657.
Proudfoot or his attorney could not be reached for comment.
Under the agreement Arizona Motorcycle Works would pay $25,000 upon the court's approval of the sale and the remaining $275,000 at closing. The business is a custom bike shop that specializes in Titan repair and service. It's near Titan's building in Phoenix.
According to paperwork filed in bankruptcy court, Titan had $5.4 million in motorcycle sales and about $198,000 of parts and apparel sales in 2006. During the same period, the company listed about $441,000 in sales and marketing expenses, which included $11,221 in R&D.
This marks the second time the Titan brand has gone bankrupt, the first time in 2001 under chairman and CEO Francis Keery. At the time, the company listed $11.9 million in assets and debts of $13.5 million.
At the time Proudfoot was a Titan dealer who was left holding $2 million in inventory. He later acquired the company's assets.
In March 2007 he was quoted in Powersports Business magazine as saying "I sincerely believe this is a year of change in 2007. When the dust settles, there will be many fewer people (OEMs and aftermarket manufacturers) out there."
Speaking during the V-Twin Expo in Cincinnati, Proudfoot also told the magazine he was hoping to double its sales in 2008 and expand its dealer network from 30 to 50 dealerships.