The Hoonigan brand, once a rising star in the automotive industry, has filed for Chapter 11 bankruptcy in Delaware after falling into a colossal $1.2 billion debt. Despite this critical situation, the company remains hopeful and believes it can obtain new financing to ensure its survival.
The origins of the problem
Hoonigan's recent history is marked by a series of complex events. After operating independently for several years, the company merged with Wheels Pro in September 2021.
Wheels Pro, which specializes in the design and sale of aftermarket wheels, tires and accessories, had been under the ownership of private equity firm Clearlake Capital since April 2018. Between then and its merger with Hoonigan, Wheels Pro had acquired several companies: Gorilla, ReadyLift, MHT Luxury Allows, ZBroz and TSW.
Following the merger with Hoonigan, the company acquired Throtl, Teraflex and 4WP, before renaming itself Hoonigan. Despite revenue growth from $844 million in 2019 to $1.5 billion in 2022, revenues began to fall in 2023, leading Hoonigan into major financial difficulties.
Restructuring plan
To deal with this situation, Hoonigan has set up a Restructuring Support Agreement (RSA) with the majority of its creditors. The aim is to reduce around $1.2 billion in debt while securing around $570 million in new capital.
This agreement should considerably improve the company's financial situation. Hoonigan expects to emerge from bankruptcy within the next two months, with the majority of its shares held by a group of its current creditors, who remain confident in the company's ability to continue its leading activities.
Financial support measures
The RSA includes a request for approval of a $110 million term loan and a $175 million ABL DIP facility, enabling Hoonigan to continue its operations during the restructuring without impacting its trade creditors, customers, employees, suppliers or partners.
CEO statement and outlook
Vance Johnston, Hoonigan's CEO, commented: “Today's announcement marks an important milestone for Hoonigan, which will enable us to strengthen our leadership position in the fast-growing automotive accessories sector. With a significantly improved balance sheet and new capital, this transaction will position us to invest in innovation and further improve our financial performance. With the strong support of our financial partners, we remain focused on delivering industry-leading products and world-class service throughout this process.”
Hoonigan is embarking on an ambitious restructuring period with the hope of stabilizing financially and regaining a leading market position. Creditor support and the search for new financing are crucial to the company's turnaround, as it aims to emerge from bankruptcy quickly and efficiently.