Court Filings Point to Huge Financial Crunch for American IronHorse

Initial court documents filed by American IronHorse in its ongoing bankruptcy case are starting to paint a more complete picture of just what drove the custom OEM to seek Chapter 11 protection. According to the paperwork filed Wednesday in the U.S. Bankruptcy court's Northern Texas district, the company saw a year-on-year drop in its sales to dealers going from $96 million in sales in 2005 to $53 million in 2006 and then to $25 million in 2007. This would indicate the Fort Worth-based company's annual unit sales went from about 3,000 to about 800.

Efforts to prop up sales by introducing lower-priced models didn't take and late last year American Ironhorse stopped production of its lineup due to what the company calls a "continuing erosion of market conditions."

Around this same time the company hired an investment banking firm to help it find more investment money or a buyer for the company and its assets. And then, in February, a trio of investors filed a petition to force American IronHorse into involuntary bankruptcy.

Faced with a growing list of creditors that included wheel manufacturer R.C. Components, the company on Tuesday March 25 filed for Chapter 11 protection.

CEO and president Buck Hendrickson could not be reached for comment Friday.

The initial paperwork indicates that American IronHorse has more than $10 million in debt to more than 50 creditors, including Textron Financial Corporation, with which the OEM signed a $40 million financing agreement in 2005 making it a primary noteholder of the company. IronHorse has also entered into a post-bankruptcy agreement with Textron for what is called a "debtor-in-possession loan." Under this deal Textron will supply a fresh infusion of cash to help with IronHorse's continuing business operations.

With the bankruptcy filing now official, American IronHorse has released its list of 20 largest unsecured creditors. These are in addition to the three investors who forced the bankruptcy and the creditors who subsequently signed onto the case.

The amount sought by the 20 listed totals $2.6 million, including the following motorcycle industry-related companies:
  • Daytec frames, Hesperia, Calif. $367,975.89
  • R.C. Components, Bowling Green, Ky. $311,020.85
  • Gladwin Paint Co., San Antonio, Texas $150,665.91
  • PIAA Corporation, Portland, Ore. $112,656.94
  • IronHorse of Texas, Fort Worth, Texas $82,586.17
  • S&S Cycle, Viola, Wis., $62,757.28
The list also includes BrandEra Ltd., a Texas-based marketing, PR and advertising firm founded in part by American IronHorse's former vp of marketing, Beth Owens and Lakeshore Harley-Davidson, a dealership in Libertyville, Ill.

When Hendrickson last spoke with Dealernews he said "I feel bad because we've got to do a Chapter 11, but we just don't have any other choice. There's no way that we could work our way through the debt load that we had, especially with the market being the way it is. We're trying to do what we need to do to keep the brand alive. "At this point in time we've got to flush [our debt] and have new seed money to go forward," he said.

Hendrickson also said there was a group of potential investors interested in American IronHorse, but couldn't share any details other than to say "they understand the business. They understand how dealerships work." He added that some of them could be current American IronHorse management investing their own money. "These are individuals who run businesses and have been successful and have accumulated some wealth…They're not looking for a quick turn and burn," he said.

While it will be up to the courts to determine the impact on American IronHorse's dealer network and suppliers, Hendrickson said that the company will eventually decide which dealers it plans to keep because the bankruptcy will negate its dealer agreements. Hendrickson said IronHorse has between 80 and 100 dealers. American IronHorse held a conference call with its dealers March 20, briefly telling them of the bankruptcy plans and of the potential buyout.