Pegasus Partners Takes Cannondale In Auction

BETHEL, CT (BRAIN)--Cannondale's new owner is Pegasus Partners, the lender that put up an estimated $60 million stalking-horse bid in January when the bicycle and motorcycle company filed for Chapter 11 bankruptcy protection.

Cannondale held separate private auctions for its bicycle and motorsports divisions yesterday at its Bethel headquarters. Pegasus' winning bids are subject to approval of the bankruptcy court. Although terms of the sale were not disclosed, the price reportedly equaled the stalking-horse bid. The company declined to reveal the other bidders.

"This is a huge step toward successfully realizing our three key objectives: ensuring a quick emergence from Chapter 11, restoring focus and adding resources to the bike division so it can continue to thrive and prosper, and preserving our employees' jobs in Connecticut and Pennsylvania," said Joe Montgomery, Cannondale's founder.

Pegasus had been Cannondale's largest secured creditor. Since January it has worked with Cannondale's management, operating the bicycle business as a going concern. It closed the motorsports division, however, in February.

"Cannondale is one of the world's premium bicycle brands," said David Uri, a partner at Pegasus. "The fact that the bike division has remained profitable despite the distraction and costs of its now-closed motorsports business clearly demonstrates the strength of the brand. Our job now is to let Cannondale concentrate on what Cannondale does best--designing, manufacturing and marketing lightweight, high-performance bicycles for the specialty retail market."

Scott Montgomery, Cannondale's vice president of marketing, added that Pegasus intends to leave the company's management in place.

"It's back to normal. This leaves the company as it has been. We aren't going to close the factory as some suitors said they wanted to do. We won't move the headquarters as some suitors said they wanted to do," he said.

Montgomery, however, was unable to comment on the future of the motorsports division. "Pegasus will have to decide what to do with that. We received bids for the motorsports division, but they were unacceptable," he said.

Scott Montgomery said the deal should close in late April. "We will formalize the structural issues then," he said.

Cannondale's secured creditors will receive an unknown amount of money. "They will get a recovery based on the inter-creditors agreement and that will be determined in the weeks ahead," Scott Montgomery said. Prior to filing, Cannondale owed $105 million to its secured creditors, one of which is Pegasus.

The company's unsecured creditors must wait in line behind secured creditors and likely will receive little or nothing. Cannondale owed approximately $28 million to unsecured creditors, which include many industry suppliers.

"There are two losers here--the share holders and the vendors. The vendors won't get much, but will get paid for a lot of business in the future. In the short-term we are paying our suppliers very quickly. And as we demonstrate our strengths we hope our business will grow and we can give them more business through bigger orders," Montgomery said.

Besides Cannondale's Connecticut headquarters and Bedford, Pennsylvania, factories, Pegasus also acquired its subsidiaries in Europe, Japan and Australia.