COPPELL, TX – Motorsport Aftermarket Group, its holding company and its brands have filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court-Delaware District.
MAG officials said the action is a comprehensive recapitalization designed to eliminate $300 million in debt.
MAG stated that:
- Employee wages and benefits will be paid in full without interruption
- Customer orders will be fulfilled “consistent with past practice without delay or disruption”
- Vendors and suppliers will be paid “timely and in full going forward”
“MAG is very appreciative of its employees who have remained committed and professional during what has been a challenging few years. Moreover, we are grateful to our valued vendors and suppliers who have remained our partner, and we thank our customers who continue to trust and rely on us. We look forward to continuing to work together for many years to come,” said MAG CEO Andrew Graves.
The company said it plans to emerge from the recapitalization process with new owners and a new board of directors. MAG/Tucker Rocky has been owned by Indianapolis-based Lacy Diversified Industries (LDI) since 2014 under a holding company called Velocity Pooling.
The new owners group reportedly will be led by Monomoy Capital Partners, BlueMountain Capital, and Contrarian Partners.
On Nov. 15, Moody’s Investors Service downgraded Velocity Pooling’s rating, stating, “For the last 12-month period ending June 30… Velocity’s debt to EBITDA was over 20 times.” Moody’s estimated Velocity’s revenue ending June 30 at about $677 million.
“Should industry trends for primary and secondary motorcycle sales remain challenging, Velocity’s operating performance will remain very weak and default avoidance will be unlikely,” Moody’s said.
“An upgrade is unlikely in the near term, but could occur if Velocity is able to significantly improve its liquidity and operating performance,” Moody’s continued.
The company and its affiliates filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code. Involved are Velocity Holding Co., Velocity Pooling Vehicle LLC, DFR Acquisition Corp., Ed Tucker Distributor Inc., J&P Cycles LLC, Kuryakyn Holdings LLC, MAG Creative Group LLC, Magnet Force LLC, Motorcycle Superstore Inc., Motorcycle USA LLC, Motorsport Aftermarket Group Inc., Mustang Motorcycle Products LLC, Performance Machine LLC, Ralco Holdings Inc., Rally Holdings LLC, Renthal America Inc., Tucker Rocky Corp., Tucker-Rocky Georgia LLC, and V&H Performance LLC.
The filing lists more than 450 pages of creditors (an estimated 14,000 creditors), including Dealers, manufacturers, service providers and individuals. The largest creditors listed are Sumitomo ($3.48 million), Pirelli Tire ($2.3 million), Arai ($1.55 million), Anthem Blue Cross ($1.4 million), Bridgestone/Firestone ($1.28 million), American Kenda ($1.1 million), Avon Tyres ($1.03 million), Cobra Engineering ($984,220), Cardo Systems ($684,097), Yuasa-Exide ($567,843), KFI/Kappers ($547,605), Ogio ($546,359), Guangdong Dynavolt ($523,739), Power Sport Industries/All Balls Racing ($440,904), Camso Inc. ($431,093), Cheng Shin Rubber USA ($425,781), Warn Industries ($423,629), Continental Tire ($404,385), FMF Racing ($376,239), EBC Brakes ($356,933), First Insurance Funding Corp. ($351,654), Bluegrade Logistics ($336,948), Yoshimura R&D of America ($301,142), Shorai ($293,937), Inoue Rubber Co. Ltd. ($291,515), Vialink/Seizmik ($266,447), Google ($250,000), Vista Outdoor ($245,498), Maxima Products ($237,213) and United Parcel Service ($225,000).
'DE-LEVER OUR BALANCE SHEET'
A MAG-issued press release said the company “is implementing a comprehensive, consensual recapitalization to eliminate approximately $300 million in debt through a debt-for-equity exchange, supported by in excess of 90 percent of the principal amount of the company’s prepetition first lien secured lenders and its asset-backed lenders.”
Said MAG CEO Andrew Graves: “Through this process, which we have been working very hard with our key lenders to accomplish over the past month, we will de-lever our balance sheet allowing us to more effectively compete in today’s evolving powersports market. MAG’s businesses will continue to operate unaffected and the company has sufficient liquidity to fund operations. Customer service and sales will continue, employees will receive wages and benefits as before, and vendors and suppliers will be paid in the ordinary course of business going forward.”
“To support operations through this process, MAG has secured up to $135 million in debtor-in-possession (DIP) financing from certain of its current secured lenders,” the company said. It added that it expects to move through the bankruptcy proceedings “quickly, and emerge in the first quarter 2018 as a stronger, better capitalized and competitive company.”
“The U.S. powersports market has been in persistent decline for the past few years. In response, MAG has been working diligently to adjust to the changing landscape and has implemented many initiatives to parallel today’s market. Unfortunately, the company’s long-term debt continues to be an impediment to success,” Graves stated in the MAG press release. “As such, we believe that, by availing the company to the Chapter 11 process, MAG has chosen the most efficient and expeditious way to right-size our balance sheet for the long term so that we remain an industry leader for many years to come. We and our key creditors are committed to what will hopefully be a short bankruptcy case.”
The court filings and additional information related to the restructuring are available at www.donlinrecano.com/vhc . Inquiries may also be submitted via e-mail to firstname.lastname@example.org.
Proskauer Rose LLP and Cole Schotz P.C. are serving as legal counsel and AlixPartners LLP is serving as financial advisor to MAG.