.
Yesterday, November 29, Niner announced in a
BRAIN article that it had filed for protection under chapter 11 bankruptcy rules as a way to streamline the sale and transition of Niner to a Colorado investment consortium. Under Chapter 11, the court will package Niner's assets and debt, which are expected to be sold to Columbia Basin Partners as early as January, 2018.
Niner posted assets of 9.8 million and liabilities at 7.9 million, which supports Co-Founder and major shareholder Chris Sugai's statement that Niner was solvent, but lacked the capital to invest in the marketing and research and development needed to remain competitive. Reportedly, Sugai had been seeking an outside investor to facilitate that, which led to negotiations with Columbia Basin Partners.
| In an interview Wednesday, company co-founder and president Chris Sugai said the Chapter 11 filing was the most efficient way to sell the company to the group, which is called Columbia Basin Partners.—BRAIN 11/29/17 |
Niner announced earlier this month, also in BRAIN, that the first name in 29-inch wheels would be sold to a Colorado based investment group made up of Niner enthusiasts who both understand and support the company's mission statement. "Our capable team remains intact." Said Chris Sugai. "That's important. Everyone here will continue to support Niner's mission of supporting trails everywhere, of building the riding stoke, and of creating incredible cycling products for riders who love to hit the dirt." Sugai said he will continue to play an active role in the day to day affairs of the company.
What Does this Mean to Niner Fans? Sugai told PB in a phone conversation today that, during the reorganization period, Niner's staff will be working as usual, shipping orders, supporting customers and taking care of warranty issues. Niner will also be fulfilling its commitments to dealers here and abroad. Sugai anticipates the hand-off to the new owners will be seamless. Perhaps more important to Sugai, was that his 31 employees will remain with Niner. Chis said that he reacted to Niner's situation early on to help ensure that the transition could take place without devastating layoffs.
Niner has been more than a bike brand. Everyone rides, and under Sugai's leadership, they have been a strong supporter of IMBA and of a number of events, as a way of re-investing in the sport. We are told that Niner's new owners are avid riders as well. If all goes to plan, the brand will have a shot at returning to strength. We wish them well.
We appreciate your support and hope to see you on the trails.
Peace,
Chris Sugai
PB commenters never disappoint.
Best of luck.
While Chris posting on here is transparent don't be fooled - it's damage control. He has the "we're still in business" pom-poms out. Chris is posting the same message, almost verbatim, on other sites as well. It's in Chris' best interest as majority shareholder to ensure the business and brand image stays afloat through Ch11 and ultimately sale - even post-sale for that matter since it's been indicated he will stay on-board.
And while saving the 31 cyclist employee jobs while continuing to warranty bikes is an admirable statement, maybe those and all other business aspects should have been considered and dealt with while Chris and/or his partners ran the business into the ground. And yet, Chris hasn't claimed any responsibility for the mismanagement that led to this situation in any of his comments that I've read. That should be his starting point...
And I would say innovation fuels growth more than vis versa. Hats off to your transparency in exit.
Keep on truckin', Chris! \m/
All of the companies in this industry need to take a hard look at themselves and admit theyre ripping off their customers - this goes for components, apparel, protection, footwear, everything - and if it doesn't stop, it's only a matter of time before you're all filing chapter 11.
I take the point about trickle down tech and capitalism and don’t really have a strong come back for that at the point.
All I can say is that from my point of view mountain biking used to be more about getting out in the nature, seeing who has the most skills and some classic one-upmanship and less about how much money’s in your wallet, how much of it you spent on your bike, how much carbon you got and how big your cassette is.
It has become too materialistic, we’re talking about how to make ourselves look faster in pictures ffs (photogs please forgive me I fully appreciate there is a legit and positive side to that argument) next it will be about how to get that ‘pro look’ out on the trail or some crap.
I dunno how I got into all this on this thread but I just had to agree with what @ctd07 said.
Must try and be more positive here, apologies. New Years resolution.
As for cost of manufacter to retail price, cars are even worse yet most people happily pay for new cars, which are outdated as soon as you leave the showroom, because every model year gets at least something better than the one before, to entice people to buy it. The fact is wages need paying, overheads need paying, shareholders need placating, bike shops need their cut, money needs setting aside for warranty issues. Again, go buy a 1k bike, itll be as good as a 3k bike from when i started riding, and be envious of the dentists on their 10k bikes.
This is an example as to how marketing spiel has blinded people into thinking bikes have made much change. Wheelsize difference has its positives and negatives, the best changes I can really see in 15 years of the bikes I've owned is in bar width, going tubeless, reliability of brakes and dropper posts. Nice to see shorter stems being specced on newer bikes, but I've always swapped them out for a 50mm anyway.
There are plenty of aftermarket companies that supply parts to fit specific cars etc. Same in the bike industry. But you can't go making standards across brands/manufacturers like that in the automotive world.
Just like we don't run road tires on a mtb. Or 20" wheels on an enduro bike.....
A better argument, as its always been made is the dirt bike comparison. I can buy a brand new 250cc dirt bike for 10k that has infinitely more moving parts etc.
and a 10k dirt bike in relative levels of performance is like a 200 quid mtb, i.e. right at the bottom end. its like saying for your 250k rolls royce you can buy a plane. its a cessna, not a f16, but you can buy it for the same money as a car so surely its better value because its more complex? not at all. compare the costs at the top end of other areas and mtbs are still cheap to some degree, cars can cost millions, motorbikes half a mil, planes billions, ships 10s of billions. yes you can get a much cheaper one of each, but you can get a much cheaper mtb. again, comparing the top of one area to the bottom of another the other will always look favourable, otherwise you wouldnt be making the comparison. how about air rifles? can spend 2500 on an air rifle with about 3 moving parts, mtbs are suddenly looking cheap. anyone can make comparisons with anything, but unless you compare the same relative level (top end, mid range, low end etc) its a rediculous argument to use because your not comparing like for like.
There still aren't standards for der hangers on each frame, thread size for the axle, why don't we have one seat post thickness? Countless times I've had to buy a new seat post because I bought a new frame. yada yada yada. Regarding the why doesn't every supercar use the same running gear? Why then do some people use 40t chain rings and some 32? Why don't I have a chain to fit both?!?!?! How come my sram 94bcd won't work on my shimano 104bcd crank?
And back to dirt bikes, that 10k dirt bike you'll see every person not pro riding it and probably not even getting half of its capabilities. You can say the same thing about the 10k mtb bike. However like you said there are crazily more expensive dirt bikes after being modded. What can you do to that 10k mtb bike. Change the color? Paint it gold? And I know, now your going to say then thats a bargain. The scale from a 1k dirt bike to 500k dirt bike is a lot more than a 200 mtb and 10k mtb. (A 500 times difference vs 50) Moving parts aren't "worth more" but the development costs more, assembly costs more, shipping costs more etc etc.
I could go on and on about at least war planes and how much they cost because of the government etc. Actually there are pry tons of standards in planes and thats why they cost so much. Will the wing work on a f16 and put it on a f14? Probably not. But there were still standards. Maybe thats why mtb cost so much.
"comparing the top of one area to the bottom of another the other will always look favourable, otherwise you wouldnt be making the comparison" Exactly and that is why I said comparing to cars is wrong. Completely different area.
I was in a parking lot once, waiting for a group that I was shuttling with. In this shopping parking lot at 8am tons of people were arriving in RV's and gearing up with food etc. to go to a football game. I was like damn they are spending tons of money on that RV to go tailgating, hundreds for a football ticket etc. But then I thought shit I spent 5k on my mtb when people pry think thats crazy. At the end of things its our hobby. Watching football is someone else. Just enjoy it. For 5k and the enjoyment I get out of mountain biking is pretty awesome.
I don't know where the hell I was going with this. Its raining and I can't go ride. Anyways carry on.
Yes, a lot of trails have been dumbed down, but despite expanding waistlines and family commitments, we ride our full carbon everything max wank factor bikes way faster down much steeper, harder lines that we would have thought possible for mortals like us 15 years ago.
Yes, the sport has become much more accessible, which has removed some of the adventure on local tracks. But the improvements to bikes have also enabled progression which allows us to have new adventures.
Dammit stop correcting all the internet lawyers with facts!.
I think you are premature on commenting on how we treat our creditors. We have always carried ourselves in an ethical manner. When a company enters bankruptcy everything is governed by the courts and all plans must be approved by the courts and done with the best interest of the creditors in mind.
Ever move credit card debt from high rate cc to lower?
Always thought Niner was an absolute joke of a brand only ridden by joey douche bags, and this is only adding to my dislike.
Chapter 11, though not a liquidation, is nevertheless a reorganization. Typically, that means that either principal is reduced, interest rates are reduced, or payment terms are adjusted for the benefit of the debtor. Of course, the degree to which a debt is reduced will vary whether the creditor is secured or unsecured.
If you would like to continue to debate this, I am happy to provide citations to statutes as well as examples of chapter 11 plans that have been approved by courts.
Cheers!
That said, perhaps we should be blaming the buyer here.
That all said, if this was the plan presented to me to save my company and the creditors get something instead of nothing and jobs stay in place, I’d probably do the same thing. I think the rest of the PB community needs to put themselves in the shoes of man that founded a company a bit more before we criticize.
Granted, Chapter 11 is almost always better for creditors than Chapter 7, because at least the creditors get *something*. But @TheOriginalTwoTone probably shouldn't criticize people when he/she lacks sufficient background to do so.
See I don't and know I don't so I'll wait to see what happens before smearing a Company's reputation on social media.
That's the issue today, to many stupid f*cking idiots have access to a PC and go opening their shitholes before they actually know a single fact. It's dangerous.
all the morons on this thread might want to read about this case and maybe they'll think twice before spreading 'facts'
www.dailymail.co.uk/news/article-4643834/Good-Samaritan-falsely-dubbed-child-predator-flees-town.html
The "internet lawyers" stating that creditors will be screwed are right. Maybe not as screwed as in a Chapter 7 filing, but screwed nevertheless. So again, calling people morons because they allegedly don't have "facts" is hilariously ironic. Please review my comments above, or do a quick search on the Google Machine for how Chapter
11 works (special hint in case you have missed it - credtors DO get screwed in Chapter 11 too).
Since you were able to find and post an irrelevant article, presumably you are familiar with Google. Or, just keep peddling nonsense and alternative facts. Sadly, it works for our "esteemed" President.
Question Chris...Why doesn't the investment firm buy Niner as is without shedding debt through Chapter 11 first? If Niner is such a viable business model then they should buy it as is.
Yes, they might get "screwed" to a degree in the near term, but I'd reserve judgement unless you actually know the situation. If I was a vendor and Niner was a significant chunk of my business, the last thing I'd want was for them to go under - that doesn't benefit them or me. It's a little weird that they can't sell to investors as-is if they're as solvent as they say, but business is complicated.
How much less are the vendors taking? 75, 60, 50 cents on the dollar? Oh that's right you don't know so everything you posted is assumption.
You may want to use Google to reeducate yourself on the meaning of the word fact.
I can guarantee no one posting- even lawyers knows a single fact directly related to this case. So, my point still stands, bunch of people assuming and mouthing off without a clue.
I am not criticizing Chapter 11. I am criticizing @TheOriginalTwoTone calling people morons and assuming that Chapter 11 isn't bad for creditors.
All that I have said (multiple times) was directly related to rebutting the argument that Chapter 11 is somehow not bad for creditors because it is a reorg instead of a discharge. Chapter 11 is still bad for creditors, but they at least get something.
In fact, while we are discussing US bankruptcy law, even creditors in Chapter 7 can get something, depending on what their status is. For example, a secured creditor is in a better place than an unsecured creditor. Secured creditors' debts are "prioritized" by the underlying asset. The bank that holds the note on your car is a secured creditor. If you declared Chapter 7 bankruptcy, the bank would have priority over your car (if you weren't allowed to keep it). Your credit card company's debt is unsecured, meaning it would only get paid if there was money left over after all exemptions and secured creditors were paid.
So, using that example, let's say that when someone files Chapter 7 they owe $10k in credit card debt and own a car valued at $20k. The loan on the car is $18k. Those are the only assets and debts they have. Excluding statutory exemptions, etc. the car would be sold for $20k, the bank would get $18k, and the credit card company would get $2k. The remaining credit card debt would be discharged. This is why credit card companies charge higher interest rates than banks on car loans (generally). This is an oversimplified example - but it is an example nonetheless. It should also not be considered legal advice.
Never thought I would be discussing (in hypothetical and oversimplified terms) US bankruptcy laws on pinkbike.
This is also not a situation where creditors just get f*cked. When a company enters bankruptcy everything is governed by the courts and all plans must be approved by the courts and done with the best interest of the creditors in mind. In this case, restructuring and reorganization with a sale to a new party is likely the best chance at the creditors have or recovering their debts.
Niner is by far the worst brand I've dealt with in 15+ years in the business.
I totally agree that finance companies aren't usually ethical to begin with, but that doesn't give debtors free reign to do whatever they want.
And also, like I said, this is all speculation, we don't know any details and I could be completely wrong, BUT the Ch 11's that I've seen are usually unfavorable to creditors.
"Through Chapter 11, as with other bankruptcy chapters, a debtor can also sell an asset free and clear of all liens either through a plan or through what is a called a 363 sale. The ability to sell an asset free and clear of liens can garner a greater sale price as purchasers are assured that the property is unencumbered and the purchaser is subject to less liability."
I guess what I mean is its protection a manner and that it is not complete absolution. It protects the company while it restructures in the fact that the rule of law will decide who gets paid and how much. Some creditors will not get paid (unsecured) or get very little. Not casting blame, they have to do what they need to do to survive. Just sucks for the unsecured creditors
""With a recapitalized balance sheet, the Debtor will be able to, among other things, hire the engineers and product managers necessary to design bikes for women, to begin offering kid’s models, to create electric mountain bikes, and continue to increase models with different wheel sizes. The Debtor also believes that by enlarging their omnichannel footprint they will be able to increase brand awareness and engagement, ultimately leading to substantial revenue growth.""
JUST STOP. You really think doing omnichannel better will make a difference? Or adding an E-bike or women/kid's specific bike to your lineup is going to help? The only thing on the above list that makes sense is wheel size. But that alone won't cut it. You guys are going to have to keep up with the joneses in terms of R&D being poured into their bikes: modern geos, stiffer/stronger frames, maybe some killer paint schemes, and if you really want to compete, provide builds at YT prices and play the value game. Everybody hates to be that guy but if you aren't careful someone else will do it and eat your lunch. Why let YT win? Beat them at that game will keeping you products up-to-date and you'll do fine. Otherwise you're headed right back to insolvency.
Do it right and there are plenty of mountain biking parents that will spend $ on a good kids bike that doesn't need a bunch more money dumped into it for upgrades.
Look at a $1500 kids bike & has the same stuff. I can't justify spending that money when the geo is the SAME as a 12 year old kids bike. they aren't lighter, not enough to mention anyway.
Chainstay length is MASSIVE. my boy can manual a bmx but not his mtb. I'll pick up a used xs 26" for him, kids mtb selection is a joke.
If done right at a fair price, you'll have parents lined up. Why else have smaller companies doing right been able to flourish? All it would take is one of the bigger guys to leverage their manufacture to do the same thing while bringing the cost down.
A used XS 26 might work, but I tired and it didn't for my son- too stretched out so had to go with a 24'' bike.
Not until I saw this did it occur to me how much their market share I my area has shrunk over the last 5-6 years. They really have not been included in the conversation with the 'new school' 29ers, like Evil, Yeti, Trek, Specialized, etc. Maybe not the "first name in 29 inch wheels" any more.
and with the least economic damage to move forward.
People and companies go bankrupt. It happens. Perhaps you can criticize them for poor management that got them in debt, but the bankruptcy filing itself is not unethical, it is just asking for recognition of a fact.
For those who can't understand how a company with more assets than debts can be bankrupt, here is a very simple scenario. They have a large debt payment due Monday morning at 9:00 am that they are contractually obligated to pay. They cannot sell enough assets by Monday morning to get the cash to make the payment. They ask the creditor to restructure the debt, so they can pay it later or more slowly, and the creditor says no. Now they are bankrupt. They go to a bankruptcy court who decides the best way to deal with the situation. The court could order all of the assets sold and the creditor paid with the proceeds, but that wouldn't get the creditor his payment by Monday morning; it would still be late. The court could look at the company and decide it is viable, allowing the company to continue to operate, and set up a payment schedule that actually gets the creditor his money, with interest, faster than selling the company's assets would. If you don't know the details of this situation, you can't judge.
There's also the article on bicycle retailer news that has more info on the "assets" breakdown...
Steve Frothingham · Web Editor at Bicycle Retailer and Industry News
Mike, I'm tallying that up now. Assets include: $4.1M in inventory, $2.6M in machinery, $1.5M in receivables, $378K in pre-paid expenses, $362K in equipment, $215K in vehicles, $146K in IP (patents), $97K in cash or equivalent, $70k in property, and $260K in R&D. I'm not clear on how R&D is valued as an asset. Goodwill is not valued.
www.bicycleretailer.com/industry-news/2017/11/29/niner-files-bankruptcy-ahead-planned-sale#.WiCOOTdryUk
Peace,
Chris Sugai
Also, other than hiring engineers and product managers - plans include kid's bikes, women's bikes, increasing different wheel size models and electric mountain bikes. (this is according to an article on Bicycle Retailer and Industry News - BRAIN)
Yes...a @NinerBikes E bike.
I wish you the best.
I was wondering when someone would say that, to save me having to.
Thanks.
Good luck Chris; as a (much smaller) business owner myself, I can empathise fully and am glad to see someone else other than myself who has gone through the sale of a business trying to ensure that ultimately, all the stakeholders (creditors, employees, customers, partners, suppliers and so on) receive what they are owed.
Good man!
And honestly PB commenters, if you have never actually been involved in the sale or purchase of a business, really, really, you have to assume all your assumptions are probably wrong.
Hell, I've been involved in a few, and every time, I learn more and more.
Oh, and I don't have a carbon anything, just 26 inch rusty old steel or Ali.
No, thats not how it works.
Wow, empathy's fun!
Not suprised the new owners want it done this way, reduces the debts at a few strokes of a pen. They still have to keep Shimano/ Sram/ fox sweet never mind who’s knocking out there frames so the hair cut will only be so tight.
Enjoy the weekend all...
Chapter 11 is kindly referred to a restructuring. Mechanically it means that the creditors (Shimano, Sram, etc) will be repaid at least what they would received if Niner filed Chapter 7 (liquidation of assets). Simply put all of the creditors will receive only a portion of the debt that Niner contractually agreed to pay them when they ordered the products or borrowed money. Lets be clear that the bankruptcy court has to agree along with the creditors that the bankruptcy plan is fair or it could potentially go into Chapter 7 liquidation. Then there is no more Niner unless someone buys it outright for literal pennies on the dollar. Niner is not out of the wood yet.
The question is where does the debt go? Simply put, it lands on each and every one of us.
1. Niner Files for Chapter 11 to minimize its outstanding debts.
2. Shimano as an example say takes a loss on (Example) $1 million and gets repaid $100K.
3. The additional $900K is assumed on the financial books at Shimano a financial loss know as a "Write Down."
4. Shimano's write reduces their income for the quarter(s) they report the loss in which then reduces their overall income.
5. Shimano pays less in taxes due to the lowering of their income. The saving in taxes is still only a portion of what their are owed.
6. Shimano calculates their then loss into product price increases over time to recoup some of their losses.
7. The loss in taxes paid to the IRS then reduces the amount the government can use for everything the government pays for such as roads, bridges, police, etc.
8. The government operates off of tax income like a business so when they are nit receiving enough in taxes...they increase taxes.
This is the example of how Chris Sugai and Columbia Basin Partners are sticking it to each and every one of us. Chris's spin on keeping jobs in place will not only last for long but he sheds responsibility for running the company properly so they did not end up here. Columbia Basin Partners is getting a great deal by having Chris shed all of the debt before they acquire the company.
The likely future:
If Niner does end up in Chapter 7 they will move forward after putting all of their dept on us one way or another. Downsizing will happen. Chris will be welcomed to leave within 2 years. At some point the company will likely sell to another brand like Dorel Sports. Either way you look at this, Niner has met its end as the we know it to be. Chris has also put his spin on how great this is when it is really a terrible thing.
The "creditors" in this case are likely banks that Niner borrowed money from. These are not "little guys" getting screwed. They are financial institutions who are in the business of lending money, and part of that business is sometimes not getting repaid. Its a risk they take and its built into the price they charge (interest).
While Your analysis is correct as to where the debt goes. The other side not presented is if Niner is successful after emerging from Ch 11 in Jan 2018.
1. All future profits the company makes will be taxed by the US government
2. Payroll to our 31 employees will be taxed by the US government
3. Parts and supplies we bring it will be charged duties by the US government
4. Profits made by our suppliers (Shimano, Sram, Fedex, Visa, etc) selling us goods & services will be taxed.
4. Profits made by Local Bike Shops selling our bikes will be taxed by the US government
5. Money we donate each year to IMBA and other like-minded organizations benefits all riders
The American taxpayers are better off that companies like Harley Davidson & GM were able to reorganize under Ch 11. We hope to follow a similar path.
Thank you all for your comments both positive and negative. We will learn from our mistakes and improve.
Peace,
Chris Sugai
Can you tell me how it works then? I want to see if my college degree, years of experience in this field, and several regulatory licenses have me confused.
I also believe shimano, sram, etc are the smaller creditors and that most likely big banks that are charging higher interest rates, penalties etc.
But really get off your high horse. Niner has pry paid more in terms of taxes for roads etc than they will affect with this chapter 11. Not including giving a job to like minded cyclists like you and I.
All this is hearsay. Until the filing is complete no one knows will know the real truth.
What really sucks were the people who owned stock in GM individually. They got screwed. And the 20k or so employees that were laid off due to the restructuring. However whoever invests in the S&P500 is making profits as GM is up over 10 dollars since this time last year.
In the GM case though they had over 50% more debt than their assets/cash. So they pry got away with more debt reduction than in this case of Niner bikes. We are talking about 170bil debt to 80 billion assets. Ninerbikes is peanuts compared to this.
Do I think Niner bikes will succeed in the future? I probably don't think so and I hope they prove me wrong, but this will further extend an opportunity to remarket themselves and most likely in the future be sold to another investment firm that owns other bike companies like we have seen recently this year. Investment firms are killing sports though. Look at KSL who owns multiple ski resorts and all the drama at squaw valley(if your a skier/snowboarder you'll know what I am talking about).
Wishing Niner, their employees, bike shops, and customers all the best. Keep making bad ass bikes!
Good luck to the company in the future. Running a business is hard and difficulties do arise. Be nice people.to the CEO.. I am sure this is not where he saw things going. He is trying to do his best in a difficult situation.
Someone's ox is getting gored in every bankruptcy--companies don't file bankruptcy if there's no benefit in it for them. It's not wild speculation to assume that here the parties taking a haircut will be suppliers and lenders. I don't think that makes Niner bad or immoral. The alternative is to take from employees or customers. Most courts won't confirm a Chapter 11 plan that allows the former owners to retain equity unless creditors are also repaid.
They were made aware of the advent of b+ in 2011 prior to its success and blew it off. Not saying that if they had taken initiative at that time it would have staved off their current Chapter 11 proceedings but going forward they perhaps should be more aware of that fact that instituting new developments is better than following the developments of others after the fact. I guess that leads to their interest in R&D but making kids bikes and e bikes part of the program only reeks of the Rip off & Duplicate aspect of it.
At the end of the day, no one wants to see their hard work go down the drain but with all the competition out there these days, will they still be viable moving forward?
Too much goodwill at play here, sometime you just have to look at letting it go. USA has some pretty weird rules. If you can't pay off your house in Australia, It will get sold and you will still have that debt for the rest of your life unless you go bankrupt......then you are royally screwed.
Or perhaps (playing devils advocate to myself), the buyer has a great plan for resurrecting the Nner brand, and this move frees them up to invest in the R&D necessary to get them there. At a minimum, they should add support for 27.5+ for fuk;s sake, since technically they could still call it a "Niner", as it would fit both sized wheels.
If the sale was part of “saving” Niner from going completely broke and out of business, that’s one thing. But if it was simply a way to make the company more attractive for a buyer, while simultaneously lining Mr. Sugai’s pockets even further, then this is just a sh*tty, unethical move.
I hope it was the former and not the latter. Because if it was a case of trying to legitimately save the company, just be honest about it and you’ll get more customer goodwill.
@sino428 I think some of you need to read up on what Chapter 11 means. The reason they are doing it before the sale is likely to restructure the liabilities, so that the debt payments are sustainable for the new owners going forward. Otherwise why would they buy the company?
This is also not a situation where creditors just get f*cked. When a company enters bankruptcy everything is governed by the courts and all plans must be approved by the courts and done with the best interest of the creditors in mind. In this case, restructuring and reorganization with a sale to a new party is likely the best chance at the creditors have or recovering their debts.
“It follows that it may be more economically efficient to allow a troubled company to continue running, cancel some of its debts, and give ownership of the newly reorganized company to the creditors whose debts were canceled. Alternatively, the business can be sold as a going concern with the net proceeds of the sale distributed to creditors ratably in accordance with statutory priorities. In this way, jobs may be saved, the (previously mismanaged) engine of profitability which is the business is maintained (presumably under better management) rather than being dismantled, and, as a proponent of a chapter 11 plan is required to demonstrate as a precursor to plan confirmation, the business's creditors end up with more money than they would in a Chapter 7 liquidation.”
Ok... I’ll admit that I had a very general perception of what Chapter 11 actually meant. Sounds like you’re doing it exactly the way it’s intended, and that current creditors may actually recoup all that they are due after the sale. Sounds like this is the way you save the business AND mitigate financial losses of current creditors.
Best of luck Niner!!!
He started a business and to do so he took on debt. This is a common practice and its done all the time. The lenders who lent him money did so knowing the risk and likely charged an appropriate amount for that capital based on their assessed risk. It sucks but it happens. The current Niner owners are not likely to make out very well on this sale.
Regarding loss to debtors and creditors, its business, this kind of thing happens all the time. Some people get rich, some get hosed, some hose everyone in the process of either winning or loosing. Certainly not a new scenario in the bike industry.
Seems like we are in some kind of funny money, economic bubble of sorts, circa 1998-99 or 2005-6. Vid goes up and there's a new Tacoma in it. Everyone's like yea, got me one, standard issue around here! New 4 Runners and Tacoma's everywhere. They start at $25k, but no one buys that one, they go TRD, baby, $41K MSRP. What is going on here?
How many new bike companies launched in the last month? 3? 4? Cheapest model most sell is $5k, and that's considered a good deal.
In this context, hopefully Niner can actually produce a product that appeals to the masses and cranks up sales in the future, because it appears the MTB market is robust enough to support quite a bit of business.
And you can get stuck with their inventory because all of the big online dealers sell their frames and bikes at 35-50% discounts regularly. No brick and mortar can compete with that level of undercutting. As someone above pointed out, you can buy 2018 models at steep discounts already!!! With an eviscerating dealer base, uncertainty with the restructure, and competition from dealer direct (Canyon), I don't see this turning around.
My money is on them becoming the new house brand for bikesdirect or similar...
Best of luck guys, hope it all works out.
That should read Chris not Chis right?
If you watch or read any financial news you often see the terms EBIT or EBITDA. What they stand for is Earnings Before Interest and Taxes (Depreciation & Amortization) and are sometimes more generally referred to as operational profit. For example a company like Niner could have a very good EBIT, which is essentially revenues less operating expenses. Meaning operationally their business is good. They are producing and selling their products and a healthy profit margin over what it costs to make them.
But at the same time they may have a lot of debt, which carries high interest payments or even principal coming due. So when you take it all the way down to actual net income, which takes into account the interest expense, you could have a company that is completely healthy operationally, be well in the red overall.
This is why a company that is going into bankruptcy could seem attractive to buyers. Often times the company is not going bankrupt because the products are not profitable, but because they are saddled with unsustainable debt payments.
They saddled themselves with debt. Almost all business have a good EBITDA.
"But at the same time they may have a lot of debt, which carries high interest payments or even principal coming due."
These are debts the business took on..apparently with the intention to not repay them. You cant spin this to a scenario where it looks like Niner was being responsible.
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Why do you think Niner had no intention to repay the debt? What the hell kind of business strategy is that?
Explain to me how taking on debt with no intention of repaying it, and ultimately going into bankruptcy is beneficial to the company or the owners of the company? The owner is likely left with very little if any value after this transaction.
Think about it. If you loaned me $1,000 and defaulted and I paid you $1 back, but next year asked you for another $1,000, you would be stupid to accept. The fact that businesses DO doesn't make it right or beneficial, it's just the ugly side of capitalism that allows this behavior to actually make sense to the parties involved, but I guarantee you that someone is getting hurt in the process, as there "is no free lunch".
Such is life!!!