GILROY
–– If the defunct Indian Motorcycle isn’t sold as a
”
turnkey
”
business by Jan. 21, its liquidation broker will auction off the
company one building, one robotic welder, one pneumatic drill at a
time.
Chuck Klaus of Credit Managers Association of California, which
is handling Indian’s asset auction, told Indian dealers about this
piecemeal sale nearly two weeks ago, but he revealed it publicly
Wednesday.
GILROY –– If the defunct Indian Motorcycle isn’t sold as a “turnkey” business by Jan. 21, its liquidation broker will auction off the company one building, one robotic welder, one pneumatic drill at a time.
Chuck Klaus of Credit Managers Association of California, which is handling Indian’s asset auction, told Indian dealers about this piecemeal sale nearly two weeks ago, but he revealed it publicly Wednesday.
The Jan. 21 auction, if it takes place, would not include Indian’s intellectual property – namely, its collection of trademarks and logos – in which potential buyers are more actively interested. Rather, Klaus said, CMA and Indian would probably close a deal for the trademarks sometime in February.
“We cannot sit on this indefinitely,” Klaus said. “If we are unable to move forward with what I’ll call a turnkey sale, then we would move forward with the piece sale.”
The piecemeal plan B could well be a more likely outcome than CMA’s plan A, which has been to sell Indian’s trademarks, real estate and equipment as a package to a single buyer. No deal has been reached for this asset package in the 10 weeks since Oct. 24, when seven companies made offers.
Also on Wednesday, Gilroyan Rey Sotelo said his Matrix Capital investment group’s offer to buy Indian is lower than it was Oct. 24.
“The more we got into this thing, the less value we found,” Sotelo said. “(For instance), they say they’ve got $4 million worth of machinery, but then you find it’s all leased.”
This casts doubt on repeated claims by Klaus and Indian Chairman Frank O’Connell over the past two months that offers for the company have risen. Bill Melvin, a Michigan businessman and motorcycle collector, said last week that his offer remains the same as it was in October and that he was still in the running and in close contact with CMA. Melvin and the Matrix group are the only two of the seven original bidders to reveal their identities.
Yet Sotelo thinks Matrix is now the auction’s front-runner and that it’s only a matter of time before his group buys Indian – or at least the trademarks. He’s confident that if someone had a better offer, CMA would have accepted it long ago.
“We’re hoping by the 15th of January we can cut some kind of deal,” Sotelo said. “I don’t know that anyone is pursuing it as hard as we are.”
“We are strictly pursuing the intellectual property at this point,” Sotelo added. “We think all the value is in the intellectual property. … We don’t want to be burdened with five or six or 10 million dollars worth of stuff that we’ll never use. … If we have to start clean (with only the trademarks), we’ll start clean. … We did it once (in 1998); we can do it again.”
But Sotelo’s diffidence about buying Indian’s Gilroy factory doesn’t mean he’s any less committed to building bikes in this city than he has been.
“If I’m involved, it’s in Gilroy,” Sotelo said. “You’ve got to understand, they (Matrix Capital’s investors) contacted me. I didn’t contact them.”
If the Matrix group buys both the physical and intellectual property, Sotelo figured it could restart production of motorcycles in 30 days. With Indian’s trademarks alone, he estimated it would take 90 days.
In a new gambit to drive up the price in the sluggish auction, CMA has allowed new bidders to enter the competition. Parties that hadn’t entered bids by the Oct. 24 deadline are now involved, Klaus said, and more continue to emerge.
Why the reluctance to accept one of the offers on the table? It could be, as Klaus said, that the interested buyers are having trouble coming up with the capital they say they’re offering.
Personal gripes could even be involved, possibly related to Sotelo’s 2002 resignation from Indian, of which he had once been president and CEO.
“Rey Sotelo and Frank O’Connell were not the best of friends, and in my opinion, Frank O’Connell doesn’t want Rey Sotelo to get it,” said Albert Morales, of Gilroy, who assembled bikes on Indian’s factory floor until he was laid off on Sept. 19 with the company’s 380 or so other employees.
Morales had already heard about the piecemeal sale through the local rumor mill, and he had a negative view of it.
“I’d rather see it open back up,” Morales said of the factory. He wants to get back to work building motorcycles.
According to Sotelo, the reason the sale is dragging on is that buyers are trying to figure how liable they would be against lawsuits directed at Indian over the last five years. Klaus said this concern is unnecessary – that in an asset-only sale like this one, all liabilities are retained by the old owners, and all legitimate creditors will get a portion of what they are owed from the proceeds of the asset sale. Klaus added that, in the hundreds of asset sales he’s brokered over the years, he’s never heard of a successful lawsuit against a buyer for something the old company did.
Sotelo, however, said attorneys have advised him that the Indian trademarks come with serious lawsuits attached, both past and future.
“We know that we can’t shake the liabilities,” Sotelo said. “We don’t know if the liability is $5 million or $50 million, and that’s the problem. … That’s what’s muddying the waters.”
Even if Matrix isn’t required to take on liabilities, Sotelo said he’s feeling some pressure from Indian’s majority owner to take on at least some of them.
“I think Audax is trying to shake the liabilities any way they can,” Sotelo said.
Peter Crowley is a staff writer for The Gilroy Dispatch.
