SAN JOSE, CA (BRAIN)—Bike Spring Bicycle Shop closed its Mountain View store on Sunday, Sept. 30.
On Monday, Oct. 1, Bike Spring filed a motion with the United States Bankruptcy Court, Northern District of California, to convert its previous Chapter 11 reorganization to Chapter 7 liquidation.
“We filed a conversion motion in bankruptcy court yesterday. This is obviously a sad day but the circumstances didn’t give us any other choice,” Paul Wassem, the store’s principal owner, said on Tuesday.
A legal dispute, which began in May with Specialized, caused the former Specialized concept store to seek the protection of the bankruptcy court. On June 27 Bike Spring filed a voluntary petition for Chapter 11 reorganization with debts totaling about $1 million divided among 18 creditors. The largest two creditors, Specialized Bicycle Components and Comerica Bank, are secured by cash, inventory and equipment assets.
Bike Spring’s restructuring plan involved continuing to sell its remaining Specialized inventory, and to pay for that inventory on terms approved by the court. Bike Spring also intended to close an acquisition transaction that was drafted in a pre-petition term sheet. However, the plan was contingent upon Bike Spring’s ability to negotiate a new agreement with Specialized, or another major supplier in its place.
Bike Spring was unable to come to an agreement with Specialized to resolve the debt and legal dispute, despite paying approximately $150,000 in pre-petition payments between January 9 and June 26. After filing Chapter 11, Bike Spring continued to pay Specialized approximately $74,000 under the terms of a court-approved agreement, and hoped to negotiate a new dealer agreement with Specialized. They rejected all offers. Meanwhile, Bike Spring was unable to obtain another major supplier.
Bike Spring elected to close and allow a court-appointed trustee to liquidate all company assets for the benefit of its creditors.