Performance Powersports DIP, sale hearing moved after deal changes

By Sarah Lizee

Olympia, Wash., March 20 – Performance Powersports Group, Inc.’s hearing on final approval of debtor-in-possession financing and approval of the sale of its assets has been moved to March 23 from March 20 following recent changes to terms of a stalking horse deal, according to documents filed Friday with the U.S. Bankruptcy Court for the District of Delaware.

As background, Performance Powersports named stalking horse bidder CPS USA Acquisition, LLC the winning bidder for its assets after receiving no other qualified bids by the deadline.

CPS USA is an affiliate of the company’s equity sponsor, Kinderhook Industries, LLC.

The purchase price under the stalking horse agreement is a credit bid of the outstanding debt under the company’s $10 million DIP facility with Tankas Funding VI, LLC, another Kinderhook affiliate; $500,000 in cash; the assumption of debt under a prepetition first-lien credit agreement; other assumed liabilities; and a wind-down amount. There is $52 million outstanding on the prepetition credit facility, plus accrued interest and other expenses.

The deal drew an objection from the official committee of unsecured creditors, which said it would support a sale and DIP financing package that carves out and preserves claims against Kinderhook and its affiliates, former chief executive officer and owner Richard Godfrey, and other members of the debtors’ management team and board for the benefit of unsecured creditors.

On Friday, counsel for Kinderhook said that it has agreed with the debtors on amendments to the deal.

The changes are as follows:

• The debtors will establish a litigation trust when the sale closes, and the litigation trust agreement will be mutually agreed upon by the debtors and Kinderhook, in consultation with counsel to the committee, and filed at least five days prior to closing;

• Any proceeds of the Godfrey claims will be split equally, with 50% payable to Kinderhook and 50% payable to the litigation trust;

• Kinderhook will also provide a loan to the litigation trust in the amount of $500,000, bearing interest at 12% per annum;

• Kinderhook will also fund the litigation trust with $750,000 in cash (an increase of $250,000 from the $500,000 previously contemplated); and

• All other claims will not be assigned to the litigation trust and will be owned by Kinderhook.

Kinderhook said these changes reflect a significant and fair increase in potential value to stakeholders in these cases.

The Tempe, Ariz.-based producer of powersports equipment filed bankruptcy on Jan. 16 under Chapter 11 case number 23-10047.

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