Hoonigan Files For Bankruptcy And Plans To Give Its Lenders Control
Hoonigan, backed by Clearlake, is now also filing for bankruptcy protection as well
Clearlake Capital Group’s portfolio company, Wheel Pros, has filed for Chapter 11 bankruptcy protection, signalling a significant shift in its business operations. The Colorado-based company, which rebranded as Hoonigan in early 2023, is seeking to reorganise its financial structure amidst mounting inflationary pressures and a downturn in demand for its aftermarket specialty auto parts.
In its bankruptcy filing, submitted in Delaware, Hoonigan reported assets and liabilities ranging from USD1 billion to USD10 billion. Chapter 11 bankruptcy allows a company to continue its operations while it negotiates a plan to repay its creditors.
Moreover, as part of this process, Hoonigan has entered into a restructuring support agreement with its creditors, aiming to significantly reduce its debt burden by approximately USD1.2 billion. The company also plans to secure up to USD570 million in new capital to support its restructuring efforts.
Hoonigan, which was founded in 1995 and acquired by Clearlake Capital Group in 2018, faced financial difficulties despite a substantial USD235 million funding round last year. This funding round was controversial as it appeared to favour certain creditors over others, adding complexity to the company’s financial situation.
Under the proposed restructuring plan, Hoonigan also anticipates emerging from Chapter 11 within the next two months. The company will likely do so under the majority ownership of a group of its existing lenders, reflecting a significant shift in control.
On top of that, the restructuring agreement includes provisions for a USD110 million debtor-in-possession (DIP) term loan facility, designed to provide additional liquidity during the bankruptcy process. The company has also taken steps to streamline its operations and improve its financial stability.
Hoonigan has signed an agreement to divest several assets, including its 4 Wheel Parts retail stores and associated e-commerce platforms. This strategic move is intended to focus resources and streamline operations as part of the broader restructuring plan.
What’s more, despite the challenges, Hoonigan remains committed to maintaining its operations and continuing to serve its trade creditors during the restructuring process. The company’s leadership is optimistic that these steps will position it for a successful reorganisation and future growth.
As Hoonigan navigates this period of financial restructuring, the focus will be on stabilising its business, reducing debt, and securing new capital to support ongoing operations and long-term success. The outcome of this bankruptcy filing will be closely watched by industry observers and stakeholders as it unfolds.
We got all this from WSJ and their full article is linked here. Thank you WSJ for the information and images.
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