CCWS Bankruptcy News posted on AR1 3-6-08

[mlj]

Champ Car series to be placed into bankruptcy UPDATE #9 As AutoRacing1.com stated exactly one month ago Champ Car is filing bankruptcy. ‘Merger’, ‘Unification’? One company is going out of business and the other company is cherry picking the pieces it wants.

In the conference announcing the ‘Merger’ Tony George stated that the IRL was to be getting (buying) the state-of-the-art medical trauma center, which is a good thing, however as in any bankruptcy proceeding a Federal Bankruptcy Judge has the discretion to reverse the sale of any of the assets sold within 90 days, and under some circumstances as far back as two years, if the Court determines the sale was not at Fair Market Value or the Bankrupt company could get more for an asset.

*FYI the attorneys have been working on the bankruptcy documents needed to file since at least the beginning of February non-stop. It is a huge undertaking, with certification of every debt no matter how small.

03/06/08 A reader writes, Dear AutoRacing1.com, It looks like Kalkhoven was lying through his teeth again by denying Champ Car would be bankrupted. A good friend and business associate who is unfortunately owed in the neighborhood of $350,000 by Champ Car tells me that he was told by fax that Champ Car has declared bankruptcy. Cheap *******s couldn't even Fed-Ex the bad news, they burned up 50 some pages of his fax paper to let him know he is getting screwed. Name Withheld to protect the innocent

[garyshell]

It looks like Kalkhoven was lying through his teeth again by denying Champ Car would be bankrupted.


I believe that Kevin would not have been allowed to say that, until such time as the papers were filed, even thought it was true. I am NOT sure about this, but I believe there is a certain "due diligence" period where the parties are required to clam up, just like is done with certain other types of business transactions like acquisitions as an example.

Gary

[BobGarage]

confirmed:-
http://abclocal.go.com/wtvd/story?section=news/sports&id=6003764


03/06/2008 14:07 PM -- Attorneys representing parent companies for the Champ Car World Series filed Chapter 11 paperwork in United States Bankruptcy Court on March 5.

INDIANAPOLIS -- Attorneys representing parent companies for the Champ Car World Series filed Chapter 11 paperwork in United States Bankruptcy Court on Wednesday.

The open-wheel racing series is set to stage its final event on April 20 in Long Beach, Calif. Champ Car intends to continue in the management and possession of its business and property as a debtor-in-possession until assets can be sold to pay off creditors.

Champ Car World Series LLC estimated it carries debts of less than $10 million, topped by $1.825 million owed to engine manufacturer Cosworth Inc. Company assets are estimated at $10 million to $50 million.

The filings contain additional business details about the unification of American open-wheel racing under the Indy Racing League banner.

An affidavit from Gene Cottingham, vice president and chief financial officer for Champ Car World Series LLC, stated that the company's four-man board of managers "determined that it is no longer economically feasible to sustain an open-wheel series and that [Champ Car] did not have the funds to operate the series in 2008."

The board of managers comprises Kevin Kalkhoven, Gerald Forsythe, Paul Gentilozzi and Dan Pettit. Champ Car's majority owners are Kalkhoven (through a company called 21st Century Racing Holdings LLC) and Forsythe (and his company Willis Capital LLC).

Cottingham further noted that Champ Car determined " ... it is in the best interests of the sport of 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."

The affidavit revealed that the Champ Car board of managers authorized the decision to file for bankruptcy on Feb. 14, exactly one week before Kalkhoven and Forsythe executed a "Memorandum of Understanding." The memorandum directs Champ Car to assign race sanctioning contracts and sell substantially all of its intellectual property and other intangible assets, as well as the Champ Car Mobile Medical Unit, to the IRL for $6 million.

The memorandum includes a non-compete covenant for Forsythe and Kalkhoven, who are each slated to receive an additional $2 million, provided they pay certain expenses associated with the promotion and operation of this year's Long Beach race; and show commitment and support of the IRL.

The agreement also calls for the long-term preservation of the Long Beach race, which is managed by a holding company owned by Kalkhoven and Forsythe called Aquarium Holdings LLC. The cost of staging this year's Long Beach race will be shared by Champ Car, the IRL, and Kalkhoven and Forsythe.

The IRL has assumed responsibility for production and telecast costs for the Long Beach race, which is scheduled to be broadcast on ESPN2.

"The cooperative effort to stage the Champ Car finale will preserve the goodwill associated with the Long Beach race, and help to ensure that IRL can add Long Beach to its schedule beginning in 2009," stated Cottingham.

Coincidentally, Champ Car's four-year history started in the same branch of Federal Bankruptcy Court on Feb. 2, 2004, when Judge Frank J. Otte approved the sale of the assets of Championship Auto Racing Teams, Inc. to an ownership group formed by Kalkhoven and Forsythe.

Judge Anthony J. Metz III has been assigned to preside over Champ Car's current case.

[Chris R]

so it sounds like there is enough money to satisfy all of the debts once the company is liquidated - is that correct?? If that is the case, why the bankruptcy? To avoid lawsuits??

[SpeedyRB]

Maybe Chris Pook will come in and save the day!
:D

[dataman1]

Why Chapter 11 used for reorganization? Why not Chapter 7 for liquidation?

[garyshell]

Why Chapter 11 used for reorganization? Why not Chapter 7 for liquidation?

Yeah, that is a bit odd, isn't it???

Gary

[BoilerIMS]

Maybe ChampCar as a business has to survive to continue the Atlantics series?