Panzica/Dae’Il GMG deal sees Custom Chrome rescued

The Chapter 11 Bankruptcy Protection filing made by the Global Motorsport Group (GMG) on January 31st has now resulted in the sale of the firm’s assets to Dae’Il USA, a ’stalking horse’ company established by former CEO Nace Panzica with the intention of rescuing Custom Chrome and GMG’s other trading divisions from the threat of closure.

At a bankruptcy hearing at Wilmington, Delaware, on February 28th, the proposal by GMG to sell its assets to Dae’Il USA was ratified by the court. The result is that the company’s trading activities will now be free of the debts and liabilities that have dogged it for several years. The filing came about when owner Cerberus Capital Partners made it clear that it would no longer continue to finance GMG operations and put the company up for sale.

The deal to buy the assets of the company and trade them as a going concern was put together by former Custom Chrome CEO Nace Panzica with backing from the Korean engineering company that manufactures the RevTech program of engines and transmissions that is distributed exclusively by Custom Chrome.

Other suitors are known to have been watching events closely, but in the end no other bids for GMG’s assets were made.

Panzica says that all vendor payables will be settled within 90 days.

Custom Chrome was founded in 1969 in San Jose, CA, by Nace Panzica and several others. The company was among the market’s pioneers in terms of building own brand and third party distribution for mass produced custom parts and accessories, and is widely credited as being one of the founders of the market seen today.

In 1989 Nace Panzica took over as CEO, the company went public, and under his watch sales grew. Strategic acquisitions were made and an innovative approach to embracing the talents of designers such as John Reed, Rick Doss, Dave Perewitz and Donnie Smith was developed.

The RevTech program, which was launched some ten years ago, capitalized on the emergence of the custom v-twin build boom, and with kit bike programs and the opening of a wholly owned European operation enjoyed market leadership for a long time.

Panzica was ousted from the Group in 1997 following the repercussions of efforts to fight off a hostile take-over bid. Since then successive owners and management teams have failed to capitalize on market opportunity, and with the Group’s debt position worsening it fell under the control of Cerberus at the beginning of 2006.

Since that time market decline, especially in the custom v-twin build sector, and competitor excellence, especially from Fred Fox’s Drag Specialties, prevented the owners from being able to rationalize the competing needs of inventory investment and debt service.

It is widely reported that the credit crunch, that has affected so many equity investors since the middle of last year, had much to do with the decision that Cerberus made to either sell or close GMG, and as a self-imposed deadline of January 31st approached, the future of the company became less certain.

It would appear, however, that the eleventh hour intervention of Dae’Il and Panzica has now saved the market from seeing one of its once most important businesses disappear. The general reaction at the V-Twin Expo following the announcement of the planned rescue was one of support for the proposal, from dealers and vendors alike.

It was even acknowledged by competitors that the disappearance of such an iconic name would have been an unwelcome and negative signal that could have spread negativity about the short and medium-term prospects for the entire Harley and custom v-twin parts and accessory aftermarket. From the dialogs that AMD has had with industry observers, vendors and dealers, any concerns about it being Far Eastern capital that has rescued the Group are being tempered by mature reflection on the role that Asian financial institutions played in the 1984 rescue of Harley-Davidson itself, and the fact that with Panzica re-taking the reins, the market sees the business as returning to experienced industry hands.

Market intelligence suggests that GMG’s selling owner, Cerberus Capital Partners, have taken a north of $100m hit as a result of their involvement.

www.custom-chrome.com

This entry was posted on 05/03/2008 at 04:35 pm and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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