Hobbico buyer sought following Chapter 11 filing

Published on: 18th January 2018

One of the largest hobby product distributors in the US filed for Chapter 11 bankruptcy protection on Wednesday.

Hobbico, formed in 1985, said it plans to sell the company and will continue operating throughout the bankruptcy process.

As it has grown, Hobbico said it has added too much debt and hasn’t been able to successfully restructure, especially while facing “an increasingly competitive industry, market headwinds and a series of one-off events with key suppliers.”

In its filing with the US Bankruptcy Court in Delaware, Hobbico said it has an estimated 200 to 999 creditors, $10m to $50m in assets, and $100m to $500m in liabilities.

Louis Brownstone, Hobbico’s president, commented: “Despite Hobbico’s core strengths, our business has faced a number of challenges in the last few years, and we have taken steps to ensure all available options to restore the stability of the company have been exhausted. However, while these efforts were taken to rebuild revenue and profitability, they did not sufficiently address our challenges, and we decided to pursue a Chapter 11 reorganisation and attempt to attract new capital investment.”

Hobbico has also sent a notice that mass layoffs could begin in April, though the company hopes to avoid them.

Human resources director Howard Salazar wrote in a letter: “Upon the sale of the company, it is possible that there will be a permanent shutdown of all Hobbico operations and locations and the permanent termination of all Hobbico employees, including the permanent layoff of all 332 employees assigned to the company’s facility at 2904 Research Road, Champaign.”

In the letter, Howard also commented that the last 18 months have been rough for the company. Two of its leading product lines filed for bankruptcy in 2016, which led to “a double-digit sales decrease.” Hobbico also faces a legal dispute with a major supplier “that considerably impacted our product supply and sales volume.”



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