CENTRAL ISLIP, NY (BRAIN)—A federal bankruptcy judge said on Thursday that he would approve a bid procedure for the auction of Iron Horse Bicycle Company on June 8, after granting the case “super priority” under the advice of a U.S. Bankruptcy Trustee.
Hon. Alan S. Trust made the decision during a 45-minute hearing at the Long Island Federal Courthouse on Thursday afternoon.
“The earlier the better,” said Kim Victor, counsel for Iron Horse, advocating for a quick sale of the company. Iron Horse stands to garner its highest bids during the spring season, when the remaining inventory of bicycles, held by online retailer Randall Scott Cycle Company, are valued highest.
Iron Horse still owes three Asian suppliers more than $5 million in back debt and a total of $12 million to more than 100 other unsecured creditors after being forced into bankruptcy earlier this year. It also owes secured lender CIT Group $4.3 million.
Last week, Outdoor Cycle Company offered to buy Iron Horse for $2 million in cash and royalties. Outdoor Cycle is owned by Randall Scott, son of Iron Horse principal Cliff Weidberg.
“This is an insider deal to a relative of the principal of the debtor,” said Douglas Spelfogel, attorney for the Asian suppliers, protesting the Randall Scott buyout. He joined counsel for Dorel Industries, another potential bidder for the company, in requesting a more deliberate, transparent and well-advertised auction process for Iron Horse. It was an unlikely alliance after Spelfogel had accused Iron Horse and secured creditor CIT of fraud and breach of fiduciary agreement for attempting a secretive sale of Iron Horse to Dorel in February of this year.
Trust said he would hear recommendations for bid procedures on June 8 at 10 a.m., after which a hearing for a sale can be scheduled.
For more details on Thursday’s hearing, read the June 15 issue of Bicycle Retailer and Industry News.