2005: Huffy turns to Chinese allies to emerge from bankruptcy
Huffy Corp., owner of several golf brands including Tommy Armour, has reached an agreement in principle for a reorganization plan that, if approved, will allow it to emerge from bankruptcy as a private company.
The proposed plan was drafted by Huffy’s primary suppliers and the China Export & Credit Insurance Corp. – collectively known as the Sinosure Group – and a committee of unsecured creditors.
According to a statement released by Huffy, based in Miamisburg, Ohio, the plan calls for all of Huffy’s “pre-petition liabilities” to be discharged in exchange for notes and “new voting common equity” of the reorganized company.
Key elements of the proposed plan include:
Initial distributions to unsecured creditors and the Sinosure Group will be 30 percent of new voting common equity (in the form of Class A shares) and a $3 million note.
70 percent of new common equity (in the form of Class B shares) and a $9 million note to other unsecured creditors.
In July, Huffy plans to file its reorganization proposal with the bankruptcy court, which is expected to hold a confirmation hearing in September.
“This agreement is a continuing indication of the strong support that Huffy is receiving from its suppliers and the confidence that they have in the long-term viability of this business,” John A. Muskovich, Huffy’s CEO and president, said in a statement. “We are particularly appreciative of the leadership role of Sinosure and our suppliers in China . . . for their support of the company during the bankruptcy period, and we look forward to working closely with them in the future as shareholders.”
As part of the reorganization, Huffy also intends to terminate the company’s pension plan. The company, which has responsibility for approximately 3,600 retirees and 130 employees, states that “99 percent of plan participants and beneficiaries would see no change in their pension benefits” because a unit of the U.S. government (Pension Benefit Guaranty Corp.) that insures pension plans would take over responsibility for paying out benefits.
Though Muskovich described the decision to eliminate the pension plan as “difficult,” he said the move was essential for Huffy’s turnaround. The company filed for relief under Chapter 11 of the U.S. Bankruptcy Code in October 2004.
“Having the (Pension Benefit Guaranty Corp.) assume these pension obligations will clear the way for Huffy to be a stronger, healthier company,” Muskovich said.
In addition to Tommy Armour, Huffy’s golf portfolio includes Ram, TearDrop and Zebra.