MAG Files for Chapter 11
The Motorsports Aftermarket Group, known as MAG, a conglomerate of multiple brands, retail and distribution channels within the motorsport industry, has filed for Chapter 11 in the District of Delaware as it looks to clear itself from some substantial debt.
As part of process, MAG is eliminating $300 million of debt through a “debt-equity” swap, which basically means MAG will exchange company equity (stock) for the debt that MAG owes its financial lenders.
Any remaining debt has prompted MAG and most of its brands to file for relief under Chapter 11 bankruptcy; according to court papers.
MAG, which owns some of the biggest names in the motorcycle industry, including the parts/apparel distributor Tucker Rocky, Vance & Hines, Roland Sands Design (under Performance Machines), and J&P Cycles, released a statement that was filled with confusing financial jargon, but regardless of this debt-equity swap and Chapter 11, says operations and customer service will continue uninterrupted.
“Through this process, which we have been working very hard on with our key lenders to accomplish over the past month, we will de-lever our balance sheet allowing us to more effectively compete in today’s evolving powersports market,” says MAG CEO Andrew Graves.
“MAG’s businesses will continue to operate unaffected and the Company has sufficient liquidity to fund operations. Customer service and sales will continue, employees will receive wages and benefits as before, and vendors and suppliers will be paid in the ordinary course of business going forward.”
Due to exchange of equity for $300 million in debt from its lenders Monomoy Capital Partners, Blue Mountain Capital and Contrarian Partners, MAG will now emerge with new owners and a new board of directors. MAG reports that the future owners have “deep experience in consumer products and lifestyle companies, including distribution, retail and manufacturing.”
It’s worth noting that MAG also owns the Motorcycle USA, LLC, known as MotoUSA, which ceased its online motorcycle news publication in February 2016 after 20 years of operations.
In regards to Chapter 11, court papers show 19 MAG brands have filed for debt relief, including MAG itself:
- Velocity Holding Company, Inc.
- Velocity Pooling Vehicle, LLC
- DFR Acquisition Corp.
- Ed Tucker Distributor, Inc.
- J&P Cycles, LLC
- Kuryakyn Holdings, LLC
- MAG Creative Group, LLC
- MAGNET Force, LLC
- Motorcycle Superstore, Inc.
- Motorcycle USA LLC
- Motorsport Aftermarket Group, Inc.
- Mustang Motorcycle Products, LLC
- Performance Machine, LLC (owns Roland Sands Design)
- Ralco Holdings, Inc.
- Rally Holdings, LLC
- Renthal America, Inc.
- Tucker Rocky Corporation
- Tucker-Rocky Georgia, LLC
- V&H Performance, LLC (Vance & Hines)
MAG expects says it expects to “emerge in the first quarter of 2018 as a stronger, better capitalized and competitive company.”