Cannondale to File Chapter 11

Ehlert Powersports
Monday January 27, 2003


Cannondale Corporation (Nasdaq: BIKE), Bethel, CT, has announced that it intends to file a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code on January 28.

Cannondale and its lenders, The CIT/Business Credit, Inc. and Pegasus Partners II, L.P. have reached an agreement in principle that, subject to Bankruptcy Court approval, will provide the Company with interim financing to fund post-petition operating expenses and to meet supplier and employee commitments. "The interim financing will be used to continue the operation of our bicycle business," said Cannondale Founder and President Joe Montgomery.

Cannondale has also reached an agreement in principle to sell substantially all of its assets to Pegasus Partners II, L.P., pursuant to Section 363 of the Bankruptcy Code and subject to better and higher offers and court approval. Pegasus would operate the bicycle business as a going concern with the involvement of current management and would purchase separately the Company’s motorsports assets, including the intellectual property related to the design of Cannondale’s motorsports products. In the meantime, management continues to work with other potential interested buyers for either or both of these businesses.

Because the Company has obtained interim post-petition financing, Cannondale will be able to pay vendors for goods and services received after the filing in the ordinary course of business.

The suspension of operations of the motorsports division means workers who had been furloughed from Cannondale’s motorsports factory in Bedford, Penn., in December will not be recalled. Production workers at Cannondale’s Bedford bicycle factory are, however, scheduled to return to work in what was only described as "the near future."