CENTRAL ISLIP, NY (BRAIN)—Iron Horse Bicycle Company owes more than $17.1 million to dozens of unsecured creditors, including about $11.5 million to various Asian bicycle suppliers, according to documents filed in bankruptcy court on Tuesday.
Many of Iron Horse’s 20 largest unsecured creditors are Asian suppliers including Giant China Co., Ltd, which is owed $2.14 million; Ideal, which is due $1.48 million; Ming Cycles, owed $1.2 million; Xidesheng Bicycle Co. Ltd, owed $1.99 million; and Giant Phoenix Bicycle Co., owed $270,084.
That’s in addition to three suppliers who initiated bankruptcy proceedings against Iron Horse in early March—Acetrikes, Fairly Manufacturing and Shen Zhen Bo-An who are owed more than $5 million combined.
Iron Horse also owes Dave Weagle $1 million (Iron Horse had licensed Weagle’s DW Link suspension for several years); Ace Bikes $55,937; and Rodale $36,500. Iron Horse is disputing the debt to Weagle as the two companies are involved in a breach of royalty license agreement lawsuit.
Iron Horse also owes its secured creditor, the CIT Group, $4.2 million. Iron Horse closed on Jan. 31 when its funding through CIT Group ran dry.
Meanwhile, Cliff Weidberg, Iron Horse’s president, has filed a civil lawsuit against former longtime Iron Horse vice president Stew Barnett and former chief financial officer Nicholas Aversano, alleging the two falsified financial statements to inflate the value of the failing company.
In the lawsuit filed March 6, Weidberg accuses the two of concocting “a scheme to advance sales and overvalue inventory on the books of Iron Horse, thereby creating the appearance of a much stronger company, in order to obtain additional credit to borrow funds for their personal gain.”
Weidberg said Barnett created a sort of Ponzi scheme by convincing bicycle suppliers to ship bikes to Iron Horse even when the company wasn’t current on its bills. Once a supplier cut off shipments, Barnett would find another supplier as a replacement.
Aversano has denied the claims against him in court saying that Weidberg should have known about the poor financial condition of Iron Horse and, in fact worsened the situation by withdrawing significant cash from the company every year, paying family members for “no show” jobs, selling inventory to his son’s company, Randall Scott Company, which led to the loss of major customers and failing to require timely accounts receivable from Randall Scott.
Barnett has until April 30 to respond to the allegations. A hearing in the Iron Horse bankruptcy case is scheduled for May 5.