Tennessee-based True Temper Sports, makers of steel bicycle tubing and distributors of Alpha Q carbon fibre forks and components, have filed for Chapter 11 bankruptcy protection in the US.
The company, whose main source of income is golf club shafts, have debts of nearly US$275 million. This move gives them the chance to avoid going bust by restructuring their business.
They have announced a plan which would see them reduce outstanding debt to $40m by raising cash and arranging more credit.
According to Benjamin Hough, sales program manager for the bicycle division at True Temper, the financial restructuring won’t affect the company’s ability to supply bike customers.
“We remain committed to continued innovation and delivering the highest quality components to our customers,” Hough told BikeRadar. We believe that our continued focus on these attributes will continue to fuel the growth of our business. We have seen a strong increase in sales during the 2009 riding season and look for the momentum to continue into 2010.”
According to Jason Jenne, vice president and CFO, one of True Temper’s goals in the past few months has been to ensure that day-to-day operations are unaffected by this back-office financial planning.
“I believe we were successful in that objective, as our plan provides for 100 percent payment of all current and future obligations to employees and suppliers, as well as the continued, uninterrupted operation of each of our manufacturing facilities around the world,” he said.
“In addition to $70m of new equity capital, we have also secured commitments from (some) of our existing lenders for a new $12.5m revolving credit facility in order to support our future business initiatives and strategic plans. Overall, following this restructuring we will be on the strongest financial footing in our two decades as a stand-alone company.”
As part of the agreement, a group of the company’s debt holders and capital partners have raised new equity that will be used to reduce debt and free up operating cashflow. The new equity investors will partner with the current ownership group to ensure a smooth financial transition for the company.
True Temper intend to file a “pre-packaged” restructuring petition with the US Bankruptcy Court in Delaware which will implement the agreed-upon balance sheet restructuring.
Management say this will not impact the fundamental business of True Temper or its day-to-day operations. They expect to receive court approval for the plan within 45 to 60 days.
True Temper’s OX Platinum heat-treated chromoly steel tubing is a favourite of framebuilders, first brought to prominence with LeMond Bicycles and Kona Bikes in the 1990s.