My Friend’s Dad Starts Fires (Bankruptcy Update)

burningbuilding.jpgMy man Fred in the comments confirms bankruptcy has been declared by the CCWS. Yesterday, March 5, 2008, bankruptcy petition #08-02172-AJM-11 was filed one behalf of Champ Car World Series, LLC. They filed Chapter 11, which means reorganization, not liquidation, I think. I’m no lawyer, I’m a weather man.

From the proceedings, the events which led to chapter 11 filing:

10. In 1994, the Indy Racing League, LLC (“IRL”) was formed and promoted an all-oval racing league with the Indianapolis 500 as its marquee event. Prior to the formation of the IRL, substantially all open racing in the United States was sanctioned by Championship Auto Racing Teams, or “CART.”

11. Subsequent to the formation of the IRL, there have been two open-wheel racing series in the United States: the IRL (predominantly ovals) and CART, followed by Champ Car (predominantly road courses).

12. On December 16, 2003, CART filed a voluntary petition under chapter 11 of the U.S.Bankruptcy Code in Indianapolis, Indiana.

13. On February 2, 2004, the bankruptcy court approved the sale of the assets of CART to the Debtor, which was then known as Open Wheel Racing Series LLC.

14. The majority owners of the Debtor are 21st Century Racing Holdings LLC (“21st Century”) and Willis Capital LLC (“Willis,” and collectively with 21st Century the “Owners”). Mr. Kevin Kalkhoven owns 21st Century and Mr. Gerald Forsythe owns Willis.

15. Since the purchase of CART’s assets in 2004, the Debtor, which is headquartered in Indianapolis, has operated an open wheel racing series in the US and other countries.

16. After four seasons of owning and staging the open wheel racing series known as the “Champ Car World Series,” the Owners and the Debtor determined that it is no longer economically feasible to sustain an open wheel racing series and that the Debtor did not have the funds to operate the series in 2008. The Owners and management of the Debtor have explored all options available to the Debtor and determined that it is in the best interests of the Debtor, the Debtor’s creditors, the teams and other parties dependant on the continued existence and operation of the Debtor, and the sport of Indy-style open wheel racing in general, to sell certain assets to the IRL and to unify the sport of Indy-style open wheel racing under the IRL, all before the start of the 2008 season.

Next, we have the Summary of the Debtor’s Intentions

17. Debtor has executed a Memorandum of Understanding [MOU] dated as of February 21, 2008, by and between Mr. Kalkhoven, Mr. Forsythe, the Debtor, and the IRL.

18. Pursuant to the MOU and documents expected to be executed pursuant to the MOU, the Debtor will sell substantially all of its intellectual property and other intangible assets and the Champ Car Mobile Medical Unit, and assign various contracts, to IRL for the sum of Six Million Dollars ($6,000,000.00). The timing of the closing of such sale is to be determined as dates and deadlines for other events between the parties and between one or more of the parties and third parties are determined or mature.

19. The Debtor is expected to run one final race, namely the 2008 Long Beach Race scheduled for April 19-20, 2008, which race will be dubbed the “Champ Car Finale.”

20. Except for the maintenance of operations sufficient to run the Champ Car Finale and manage this bankruptcy case, the Debtor will immediately cease all business operations and the employment of its employees will be terminated as projects which remain and which are valuable to the Debtor and its bankruptcy estate are completed.

21. The debtor will sell all assets not purchased by IRL and propose the distribution of the proceeds from the sale to IRL and sale of all other assets to the creditors of the Debtor and of this bankruptcy estate, as may be determined during the course of this bankruptcy case.

We’ve also got the official list of assets being acquired. Not necessarily breaking news, per se:

(i) all of CCWS’ intellectual property and all other intangibles including, without limitation, trademarks, tradenames, copyrights, photo and video archives and other rights, historical records, goodwill and going concern value;

(ii) all contracts, including sanctioning agreements, which are both assignable and designated by IRL in its due diligence as contracts which the IRL would agree to assume (in the alternative, the IRL may enter into new agreements, conditioned upon the termination of the existing agreements and obligations of the Debtor); and

(iii) the Champ Car Mobile Medical Unit (excluding tangible contents not owned by Debtor)

Also, TG is paying KK and GF $2mil each to be consultants, and has them locked into a 5 year no-compete.

Regarding the Atlantics, the series

…is not affected by the other transactions described herein.

36. Pursuant to the Agreement, the IRL shall consider acquiring ownership and operations of the Atlantics Series, with such decision solely at the discretion of the IRL and upon such terms as shall be set forth in one or more definitive agreements to be negotiated. If the IRL declines to acquire the Atlantics Series, the Debtor may sell the assets related to the Atlantics series, to the Owners or another buyer. The Agreement includes terms and conditions with respect to obligations of the IRL and the Owners, depending on whether the IRL acquires the ownership of the Atlantics Series and provides that the Owners’ purchase and operation of the Atlantics Servies will not be considered a violation of the Consuting Agreements referenced herein and in the Agreement.

Surfers, Long Beach, and Edmonton are the only contracts explicitly mentioned, at least thus far in what I’ve seen.

The top six creditors to CCWS are owed six digits or more. Here’s a list of the top 6 creditors to the CCWS and amount of claim:

  • Cosworth, Inc. ($1,825,000)
  • PKV Racing ($635,883.62)
  • RuSPORT, Inc. ($424,861)
  • Mullin Production Group ($400,000)
  • Dan D. Jones & Associates, Inc. ($359,000.65)
  • Forsythe Championship Racing Ltd., LLC ($327,961.04)

These are the things I found noteworthy on my first run-through.  I’ll review and give a summary in a bit.  I’m sure I missed a few nuggets.

2 Responses to “My Friend’s Dad Starts Fires (Bankruptcy Update)”

  1. Fred Says:

    http://financial-dictionary.thefreedictionary.com/Chapter+11,+Title+11,+United+States+Code

    Chapter 11
    Named after the U.S. bankruptcy code 11, chapter 11 is a form of bankruptcy that involves a reorganization of a debtor’s business affairs and assets. It is generally filed by corporations which require time to restructure their debts.

    Chapter 11 gives the debtor a fresh start, subject to the debtor’s fulfillment of its obligations under its plan of reorganization.

    Notes:
    A Chapter 11 reorganization is the most complex of all bankruptcy cases and generally the most expensive. It should be considered only after careful analysis and exploration of all other alternatives.

    CCWS selling most of its assets to IRL.

    CCWS still owns Formula Atlantic which is an asset.

  2. Saltyseadog Says:

    Is the bankruptcy petition available to view anywhere on line?

    Thanks.