GILROY
– Who will own the third coming of Indian Motorcycle? Whoever
wins a silent auction.
No one had actually entered a bid as of this morning, but 17
companies had signed confidentiality agreements and requested
detailed information about buying Indian Motorcycle, according to
officials at Credit Managers Association of California. Indian has
hired CMA to handle its liquidation instead of going through
bankruptcy court.
GILROY – Who will own the third coming of Indian Motorcycle? Whoever wins a silent auction.
No one had actually entered a bid as of this morning, but 17 companies had signed confidentiality agreements and requested detailed information about buying Indian Motorcycle, according to officials at Credit Managers Association of California. Indian has hired CMA to handle its liquidation instead of going through bankruptcy court.
“We’ve told bidders that we need their offers by the middle of October,” CMA Estate Manager Michael Joncich said Friday. Although Joncich stopped short of giving a final date for bid submission, former Indian President/CEO Rey Sotelo said he’d been given a deadline of Oct. 17.
At present, the potential buyers are appraising what they think Indian’s assets are worth to figure how much they will offer.
Contrary to a previous report, Indian Chairman Frank O’Connell says he won’t be among the bidders. O’Connell said Friday he is not putting together a bid for Indian, nor has he joined with anyone else in doing so. Yet Jeffrey Najar, executive producer of American Cycle Talk Internet radio, maintains that O’Connell told him last week he was planning a bid; it was the reason O’Connell gave for not appearing on the talk show, Najar said.
O’Connell said he’s not yet sure if his relationship with Indian Motorcycle will continue beyond its liquidation. He said he’s pleased there’s so much interest in Indian – the United State’s first motorcycle company, formed in 1901 in Springfield, Mass. and defunct from 1953 to 1998.
“I am very hopeful that the company will be able to restart (soon),” O’Connell said.
The only person to publicly announce his intentions so far is Sotelo, who in 1998 brought the company to Gilroy in place of his Gilroy-based custom operation, California Motorcycle Company. Sotelo announced his plan to bid Oct. 6 on American Cycle Talk; He was Najar’s third choice for a guest after former Indian Executive Vice President Fran O’Hagan and O’Connell declined.
Sotelo said he doesn’t know who else is bidding but thinks the offer he and his team of investors make will be competitive.
Indian gave the Burbank-based CMA its Gilroy factory/headquarters, its inventory of about 200 motorcycles and its leftover cash; CMA took possession of these on Sept. 25. Indian retains its trademarks and logos, which were worth about $18 million when Indian consolidated them in 1998. Together, Indian and CMA are offering the plant and trademarks as a package deal to the highest bidder.
CMA is auctioning the motorcycles separately, taking bids from Indian’s 200 or so dealers. On Thursday, CMA announced to dealers that since demand for the bikes was high, the deadline would be extended to Oct. 13. Since the factory is no longer operational, the bikes will be sold without warranties.
These sales are for assets only, not stock – meaning that the buyers will not inherit Indian’s mountain of debt and liabilities, according to Joncich and O’Connell. Unless the company sells for much more than expected, the proceeds won’t be enough to fully pay off Indian’s debts.
“(Debts) are much higher than what we estimate the assets to be,” Joncich said.
In that case, as in bankruptcy court, creditors would receive a percentage of what they’re owed.
Before the stockholders would receive any payoff, the company would have to sell for enough to pay off the creditors with money to spare – not likely, O’Connell and Joncich indicated.
“It only goes to the stockholders if the creditors get paid off,” O’Connell said.
O’Connell is Indian’s second-largest stockholder. Boston-based investment firm Audax Group is the majority owner.
Among the creditors will likely be Indian’s 380 or so laid-off employees, who will be represented by a lawsuit filed by former Indian quality-control inspector Russel Frost, of Hollister, if a judge approves the suit’s class-action status. Frost claims Indian broke state and federal law by not giving employees a 60-day notice before laying them off. Indian says it qualifies for a legal exception for failing companies.
Frost’s attorney, Bill Marder of the Hollister-based Paxton-O’Brien firm, said he would have preferred Indian go through bankruptcy court to CMA. He’s afraid Indian will be able to hide some assets from its creditors more easily via CMA, whereas “a judge takes a harsh view” toward disclosure.
“I disagree with that contention,” Joncich said, stating that CMA is there to serve the creditors. “We are responsible for hidden assets. If we make a mistake, creditors can look to us to make a remedy.”
Joncich said CMA’s liquidation process is quicker and more flexible than bankruptcy court, but it’s just as thorough.
“We frequently do it more efficiently than does a bankruptcy trustee, but we follow the same bankruptcy priorities as does a bankruptcy trustee,” Joncich said.
CMA’s job, as Joncich sees it, “is to liquidate assets, collect claims from creditors and distribute the liquidation proceeds to the creditors. (Indian) agreed to pay a fee for our administration of the assets.”
