Tell me this is late April Fools

[Scott]

Its a sad day. American Superbikes owned by India just does't have the same ring. IF HERO were buying Erik out there would no need to suspend operations and fire the staff, you simply do the transaction and pencil in Inc or Subsidiary on all the signage. Not over think it since we don't have many facts but:

They suspended operations, and closed firing the staff.

Instead of going chapter 11 they go WI Chapter 128 which is more like a protective order against being sued and shelter from additional interest from creditors until you can pay them off. Under 128 they could have kept the staff and continued supporting dealers and customers but didn't which makes me think its way more grave a situation than just a restructure.

The sudden lack of funding large enough to overthrow an operation like this is either GE or Hero.

If its was GE that means they don't have enough to pay the suppliers which is why we seem to always see parts out of stock. In which case some may be able to rescue them and operation MIGHT resume ( they didn't have to close for this scenario though).

If its HERO, that's a major problem as the principle investor pulling out would leave Erik having to fund operations and pay off debts himself (as before.) Seeking chapter 128 buys him 36 interest free months to pay off creditors by selling off company and personal assets. In that scenario its turn off the lights and shut off the ac and only eat Roman noodles while we figure a way out of this without loosing the house...

The one thing I feel sure of is something very specific and very planned is going on. I also feel nearly as certain that bikes will continue to get made relatively soon (the real value here - and there is value - isn't in the equipment or buildings or office furniture, it's in the specific designs and road-legal bikes that can be made and sold using existing equipment).

As you mention, if Hero intends to just continue with Erik in a diminished role, it doesn't seem like they'd go about it this way. They'd buy Erik out (and while he may have been reluctant to sell, if it was the difference between shutting the doors or allowing Hero to continue, I don't think he'd take the company down with him) and it would be a lot cleaner and neater than this without the negative press, and the transition would be nearly invisible. If the company goes on the market and Hero intends to get it back, they take the risk of losing it or paying more than they likely could have by making a simpler offer to Erik.

Hero wants to get into the US market. The worst thing they could do with that clear goal in the near future would be to screw over an iconic figure in American motorcycling while also pissing off a lot of great dealers (like AF1) who could sell the crap out of Hero motorcycles. The value of those relationships has to be higher (though difficult to quantify) than the few million dollars at stake with keeping EBR running.

I can't think of a logical explanation for what's happening, but it has to be there.

If you go to EBR's web-page, it will say: "It works!

This is the default web page for this server.
The web server software is running but no content has been added, yet."

If they were simply turning off the lights, it seems like the old web-page would stay up for many months until the bill eventually came due.

There's something going on and management and communication people are involved. We saw what Erik did when Harley pulled the plug. If EBR were just turning off the lights, I suspect he would have more to say than we've heard. The silence in itself is very telling and I suspect Erik would love to come out and say what's really happening, but his hands are tied by legal restrictions.

While I'm very baffled by what's actually going on, If I had to bet, I'd say that things will continue in some way and the damage to employees, suppliers and dealers will be minimized as much as possible (not to say there won't be transition and pain).

[Hughlysses]

I'm wondering if Classaxe isn't close to the truth.

Of the two outside companies that are heavily involved (GE and Hero), I'm thinking it's more likely GE is the culprit. I believe they provided financing for dealer showrooms and for dealers to acquire EBR bikes prior to selling them. Erik's comments make this deal sound like there was a negotiation involving funding that couldn't be worked out which drove them to seek receivership. Since it seems EBR sales are slower-than-expected, GE might have refused to extend their financing arrangement with EBR, which could prevent any new motorcycles from being shipped to dealers. Perhaps receivership gives EBR an opportunity to look for another source of financing, or maybe it just puts things on "hold" until Erik can finalize a complete buy-out by Hero.

I hope some more details come out soon.

BTW- www.ebr.com won't come up at all this morning.

[Hughlysses]

This seems to be a new addition to the Journal-Sentinel article:

Bids will be solicited for the company as part of the Chapter 128 process, with the winning bid to be determined by a state court. At the company's request, attorney Michael S. Polsky will be the court-appointed receiver.
Any proposed sale is subject to court approval and higher or better bids, according to Polsky. The company anticipates that its assets will be sold, according to a state Department of Workforce Development notice that announced the immediate termination of the employees.

[Scott]

Here's what I'm thinking (and I could be WAY off on this, but I think it might be at least close). First off, I don't believe GE has any ownership stake, so they may just be relegated to the group of people standing in line to get at least some of their money back (and under Chapter 128, they may get a good chunk).

I suspect there have been cash issues for a while. Hero, of course, could have written a check at any time to make those cash issues go away if that was in their best interest. But they want ownership and writing a check to make the problems go away is counter to their goal of ownership.

Erik doesn't want to hand over control but his options are limited. I suspect he has been talking to many people - GE (who is likely reluctant to throw good money after bad) and other industry people and capital firms who understand the value of the company. Those other entities (let's imagine Polaris as one possible entity) are probably reluctant to get involved unless they can get whole or partial ownership - but that's not going to happen as long as Hero is involved.

So I imagine Hero and at least one other entity will be bidding for this. Since Erik didn't make a deal with Hero as he could have, he has probably created some bad blood with them and likely will be out (though maybe maintained in some capacity for marketing and public relations purposes). He probably has a better chance of staying relevant with the mystery entity, so he's probably playing high stakes poker by pushing it to this point and hoping the other party will end up with the company instead of Hero.

But there's a lot of speculation in there. It could be as simple as Hero and Erik are working together and this is a way they can reduce some debt (though I think the PR damage in that case would be worth more than the cash), but in any case, I still feel confident that EBR will continue in some form.

[Hughlysses]

Scott- my first thought was that maybe GE is the problem. While they don't apparently own any of EBR, they provided the financing that allows dealers to set up show space for EBR's and allows them to finance EBR bikes prior to selling them to customers. If GE put a halt on this program, that means EBR would have great difficulty in moving any more motorcycles out of the factory. This would completely shut down motorcycle operations.

Maybe receivership puts a hold on things to prevent creditors from slicing EBR up and selling the parts and gives Erik a chance to sell the whole deal to Hero? Who knows?

Over at Badweb, Court has repeatedly said that the vast majority of the work that's been going on at EBR for the past year or so is engineering for outside customers. This was apparently providing enough cash to keep the place running. Of course, that might just have kept the design staff funded while doing nothing for the motorcycle production operations. That would support this "GE is the cause" theory.

I am not a business/finanical expert and I haven't stayed at Holiday Inn Express in a couple of years.

[Scott]

Scott- my first thought was that maybe GE is the problem. While they don't apparently own any of EBR, they provided the financing that allows dealers to set up show space for EBR's and allows them to finance EBR bikes prior to selling them to customers. If GE put a halt on this program, that means EBR would have great difficulty in moving any more motorcycles out of the factory. This would completely shut down motorcycle operations.

Maybe receivership puts a hold on things to prevent creditors from slicing EBR up and selling the parts and gives Erik a chance to sell the whole deal to Hero? Who knows?

Over at Badweb, Court has repeatedly said that the vast majority of the work that's been going on at EBR for the past year or so is engineering for outside customers. This was apparently providing enough cash to keep the place running. Of course, that might just have kept the design staff funded while doing nothing for the motorcycle production operations. That would support this "GE is the cause" theory.

I am not a business/finanical expert and I haven't stayed at Holiday Inn Express in a couple of years.

I think you may very will be right with your "GE is the cause" in that they are probably the entity owed the most money and therefore the one pushing the hardest. But GE and Hero have very different roles and while I suspect GE simply wants cash and then they'll get out, Hero wants ownership. I doubt GE wants ownership (and I'm not sure if anyone implied that, but it was one of the many things rolling through my brain in trying to figure this all out).

But if we assume all GE wants is cash and we know Hero could write them a check, the real cause of being where we are now is Hero not writing that check. And the cause for Hero not writing that check could be that they are just done and want out, but I suspect it's not that they want out, but they want ownership.

As for the engineering, I suspect 90% of that work is work for Hero - which just adds to the complication.

I'm skeptical that this is all part of a plan to sell ownership to Hero because that could have happened very easily with no drama. I think the fact that it went to where it did is clear evidence that Erik has something else in mind other than selling to Hero.

I strongly suspect he has someone who he knows will make a bid. The problem is, he has no way of knowing how the bidding process will shake out.

Let's start with a complete hypothetical. Hero has been squeezing Erik and the company. EBR has needed cash but Hero has said: "Sorry, you figure it out Mr. Majority Owner." With the expectation that when things got bad enough Erik would sell. Erik realized it's getting to that point so he's been talking to Polaris (again, COMPLETE hypothetical) and they're interested in owning EBR, but, of course, they don't want to share ownership with Hero. And Hero isn't interested in selling to Polaris.

So Erik has pushed to the point of receivership where he knows the company will be auctioned and he knows Polaris and Hero will be bidding on it. What he can't know is the result of that bidding. Polaris may have told him how much they'd be willing to pay, and he may know how much Hero has offered him, but he doesn't know, once the bidding starts, who will come out on top.

If Hero ends up getting it (as is very likely in my opinion), he's out and he has pissed a lot of people off. Now if they're smart, they may keep him on in some symbolic role to keep up appearances until things are more established and Hero has a big US footprint, but I can't imagine that's what Erik wants.

So if my scenario is even close, Erik is taking a big risk.

But as I've said, I feel confident that somebody will be making 1190RX and 1190SX motorcycles once this is done. Unless someone wants to make motorcycles, everything EBR owns is probably worth less than 5 million dollars. If it's just Hero bidding against used equipment dealers, they'll buy it for $5 million and be thrilled. But I suspect it will be Hero bidding against someone else who wants to make motorcycles and the company will probably go for something like $40 million and continue making motorcycles. The difference at that point being that the owner (whoever it might be) will be all-in and willing to invest to get EBR (or whatever it's called at that time) off the ground.

If Hero had spent money to market the brand over the past couple years, I think we'd be seeing them flying high now, but they didn't because they weren't all-in.

[Scott]

Here's an interesting "What if". Once this goes up for bid, it could go to anybody - even people who may have learned about this by reading it yesterday when the rest of us did.

What if . . . Harley bought them?

[Hughlysses]

^ Ha! That thought has occurred to me too. Wandell is out, right? Maybe the new HD CEO is more open-minded.

I really hope it turns out Hero is not the cause of this, but it does seem likely. Starting ~10 years ago, I corresponded with a guy that worked for a Swiss company that was trying to sell new locomotives (actually steam locomotives) to India to replace locomotives they'd supplied in the 1950's. He related how the Indians were extremely difficult to deal with and always wanted something for nothing. The Swiss were extremely suspicious that any engineering they provided would be quickly copied by the Indians and they'd be out of the picture. He didn't have much good to say about the Indians they dealt with.

[Scott]

^ Ha! That thought has occurred to me too. Wandell is out, right? Maybe the new HD CEO is more open-minded.

I really hope it turns out Hero is not the cause of this, but it does seem likely. Starting ~10 years ago, I corresponded with a guy that worked for a Swiss company that was trying to sell new locomotives (actually steam locomotives) to India to replace locomotives they'd supplied in the 1950's. He related how the Indians were extremely difficult to deal with and always wanted something for nothing. The Swiss were extremely suspicious that any engineering they provided would be quickly copied by the Indians and they'd be out of the picture. He didn't have much good to say about the Indians they dealt with.

I respect and admire Erik and I hope ultimately he has a stake and a say in whatever is to come. But honestly, if it were my money and I was a minority owner and I was pumping cash to keep things going, I'd want to get something for my cash. "You want money? Give me something in return and that something I want is a larger ownership stake."

Once Erik sold 49%, he was hanging by his fingertips to his majority stake and he had nothing left to bargain with. But if he hadn't sold that 49%, EBR never would have gotten off the ground, so it's just the way it works.

There may not be any 'bad guys' here. Just different entities bringing different things to the table and everybody wanting more of a say regarding what they're putting their efforts into.

[Hughlysses]

Some more details: http://www.bizjournals.com/milwaukee/news/2015/04/ 15/erik-buell-racing-shutters-east-troy-plant-file s.html

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quote:
Nixon [attourney for EBR] said the goal will be to find a buyer who will continue the motorcycle business. Bids will be solicited as part of the legal process, with the court to determine the winning bid.

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