When the announcement came out yesterday that MSD Performance had voluntarily filed for Chapter 11 Bankruptcy, everyone immediately started freaking out about parts availability, contingency payments, and more. Calm down folks, all that stuff is going to be fine. We happen to have a pretty close relationship with all the guys at MSD and Racepak, and got the scoop yesterday about what’s really going on and why. We were told to keep it secret, but you know us we can’t help but tell our readers everything.
The full press release is below, but ultimately here’s what you need to know. Everything will be exactly the same as it was last week and the weeks before. MSD will continue to be a BangShift sponsor, they will continue to pay contingencies for racers, they will continue to offer killer deals, rebate programs, and specials. They will continue to manufacture parts and systems just like always. Nothing has changed from a public standpoint, and no MSD employees are being laid off. All is good. In fact, better than good as MSD is in negotiations to sell their entire company in order to restructure their debt and become a bigger and more profitable entity that is developing more and more cool products for all of us hot rodders.
Why would they sell you ask? Well, MSD Performance owns MSD Ignition and Atomic EFI, Racepak, Edge, and SuperChips. When they expanded to include all these product lines a few years ago prices were at a premium, as were the costs of financing. Sound like you or your neighbor or friends and their purchase of a house? It should, because like the folks you know they are keeping their heads above water, but not getting any closer to shore.
With changes in the economy, aftermarket trends, and interest rates, it has become stupid expensive for MSD to pay their debts each month, but they keep doing it. Sure, they are doing better than they have in years, but they are stuck with loan payments that will never allow them to get out of debt. This is not a comforting or smart place to be for a business so they are taking steps to remedy this.
These steps do not include a fire sale of MSD, Racepak, SuperChips, or Edge parts. It does not include selling off equipment. The company as a whole however is for sale and currently in negotiations. This is why MSD Performance filed Chapter 11 Bankruptcy protection.
Stay tuned, and we’ll fill you in on more as it comes along, but the gist is this isn’t a bad thing for any of us or any of the guys at MSD.
MSD PERFORMANCE INITIATES VOLUNTARY CHAPTER 11 PROCESS TO COMPLETE AN ORDERLY SALE
Lenders’ Consent To Company’s Use Of Cash Collateral Ensures Operations Continue As Usual With the Highest Quality and Outstanding Service
EL Paso, Texas, September 6, 2013 – MSD Performance, Inc. today announced that to address liquidity needs and facilitate a restructuring, the company and its U.S. subsidiaries have filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware under Chapter 11 of the U.S. Bankruptcy Code. The filing does not include the company’s non-U.S. entities.
MSDP has determined that the best way to preserve value for its stakeholders is through an orderly sale of substantially all of its assets. To ensure the most efficient sales process possible and to optimize the potential results for all parties, the Company has decided to execute this sale process under the protection of the U.S. Bankruptcy Code.
Through the Chapter 11 filing, MSDP seeks to preserve continuity, to the greatest extent possible, for its customers, employees and business partners while it continues discussions with potential buyers to secure the highest and best outcome for its businesses.
“As an industry leader in the performance ignition systems market for over 40 years, MSDP brings significant value to customers, suppliers and potential buyers based on our long-standing customer relationships, robust product offering and proven focus on quality performance,” said Ron Turcotte, Chairman and CEO. “Selling operations on a going concern basis in an orderly sale through Chapter 11 is the best way to preserve as many jobs as possible, best serve our customers and will allow our operations to emerge from bankruptcy in a relatively short time frame,” said Turcotte. “The operations we are selling have strong product portfolios, advanced technologies and continue to perform well operationally.”
Under the bankruptcy sale process, the proposed transaction is subject to the execution of a definitive asset purchase agreement, court approval and other customary conditions. Interested parties will have an opportunity to submit higher or better offers for MSDP’s assets.
The Company restructured its debt in 2009 following the financial downturn as well as a series of acquisitions by prior management, which burdened it with excessive debt. Since that time, the Company has reduced operating costs, introduced award-winning products and accelerated marketing initiatives. The decision to file under Chapter 11 is necessary to facilitate this transaction, which positions MSDP to take advantage of emerging growth opportunities.
To fund its continuing operations MSDP has received the consent of the lenders under its existing secured credit facility to use the Company’s cash collateral. Subject to Court approval, the Company’s cash collateral will be used for the company’s normal working capital requirements. Employees will continue to be paid as usual, including their healthcare and other benefits and no layoffs or facility closings are anticipated. Customers will receive their orders as usual and the Company anticipates that there will be no changes in warranties or other customer programs Additionally, suppliers will be paid for goods and services after the filing date in accordance with existing terms and contracts.
Interesting spin on bankruptcy, however, bankruptcy is designed to protect the creditors not the debtors. While they may be able to stay the course during and after bankruptcy; the decision isn’t really in their hands anymore. After all, the creditors know that a debtor can go bankrupt; and if they chose to let the Court do the dividing of assets, it’s safe to assume that they think they can do better in Court than they would by negotiating with the current management structure.
Yes, they are a sponsor but don’t be misled by their attempts to put a positive spin on a bad situation. Bankruptcy doesn’t care what management has to say. In fact, once they are in bankruptcy court, they have to ask for permission from the Court to withdraw – and that isn’t like a “normal” withdrawal – the creditors get a say in whether or not it happens – those same creditors who were unwilling to renegotiate the terms of their loans….
Will MSD continue on as a brand? I believe so…certainly NOT as the entity they are right now(with all the other brands under the same ownership, bankruptcy court will force a sale), but they’ll continue.
I DO believe there WILL have to be some cutbacks on sponsorships/contingency participation..to say/think otherwise in this economic environment is pure denial. May not happen immediately, but things WILL change. Just waiting on Jeg’s and Summit to hit the wall next….
I think Chapter 11 is reorganization not liquidation. They will come out stronger financially. If there bankers disapproved, they could have offered to refinance the debts in question. Never being able to pay off a loan is a long time!
Will the instructions still be printed in English after this?
I sure hope they don’t go to China/ foreign. There is plenty of that junk on the market now. MSD products have always been very good. Hate to see them join the ranks of junk/ overseas parts sellers. D
Too late for that. They have been buying and will continue to buy from China. All of this results from poor management and bad judgment and decisions. It seems to be coming around……
Has multi million dollar company, can’t manage to pay it’s debt. I guess we call that the American way…. You know rack up your debt, then screw everyone over….
Someone goes to the bank and asks for money promissing to pay it back at a rate and payments agreeable to both parties and then uses the money however they see fit. When it pleases the borrower (they cannot pay the execs or stockholders what they want) they forget their end of the deal and declare bankrupcy. THEN they get someone that needs their sponsorship to tell everyone how good of a deal this is going to be for the employees, the customers, and maybe even the creditors as if the copanies promises to repay shouldn’t mean anything.
The only way we as customers can win is to get on the bandwagon and borrow as much as we possibly can and declare our own bankruptcy. Maybe MSD would like to play the role of Banker this time?
where can I get information on buying into the company?
If its filing for bankruptcy, the business clearly isn’t worth anything, only the assets are. Thats basic business economics.
I think it has potential as a business. So, as a businessman, I’d like to know who to contact regarding the possibility of purchasing some/all.
And as a businessman, “potential” doesn’t have much value either
My rule of thumb in life and business is never have more debt than you can pay off with the cash on hand. Looks like the board must be filled with guys from the Federal reserve.
So, Mallory wins again!
“These steps do not include a fire sale of MSD, Racepak, SuperChips, or Edge parts. It does not include selling off equipment. The company as a whole however is for sale and currently in negotiations. This is why MSD Performance filed Chapter 11 Bankruptcy protection.”
Notice the last word in the paragraph, it means protection from bankruptcy not bankruptcy. It facilitates the release of funds to allow the company to continue trading as it is refinanced via the sale.
Good luck to the company, your products are the best!
Vince,
I totally agree with all you have stated and wish MSD the very best for making top shelf products over the years and, for the most part, withstanding the pressure to offshore manufacturing. I will remain an MSD faithful…
Something doesn’t add up…
Their CFO should have restructured their debt liabilties a couple of years back..
Now they have less liquidity (cash) and assets, and will likely have difficuulty borrowing enough funds to pay off their debts..
Filing Chapter 11 rather 7, gives them some breathing room but the next several months are crucial.. Their survival really depends whether or not they can get their operating expenses under control… And will their banks extend enough funds/credit line to work through the process…
MSD shot themselves in the foot a few years back by eliminating the MVP pricing. Once the MVP pricing was eliminated local brick and mortar shops like myself no longer could compete on price. With big warehouses like Keystone Automotive back dooring product from their mail order company http://WWW.streetsideauto.com its the nail in the coffin. Lots of small shops went on to sell other brands of ignitions that they could make a profit on.
MSD Performance Files Chapter 11 Bankruptcy, We Find Out What’s Really Going On | BangShift.comBangShift.com