Bankruptcy Court Filing: Chapter 11 Involuntary Petition Against Tough Mudder, Inc.
Author: Brett Stewart
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Note: Previous and ongoing coverage of Tough Mudder’s difficulties in 2020 can be found here – Who Will Save Tough Mudder? Will TM Disappear in 2020?
Deleware Bankruptcy Court Filing
Several of Tough Mudder Incorporated (TMI) creditors have filed for a Chapter 11 Involuntary Petition and Emergency Motion for Appointment of Chapter 11 Trustee. (PDF Downloads or see screenshot below)
From the Emergency Motion: (bolded sections by editor)
On January 7, 2020 (the “Involuntary Petition Date”), the Petitioning Creditors filed an involuntary petition under chapter 11 of the Bankruptcy Code against each Alleged Debtor (editor’s note: Tough Mudder, Inc.). On that same date, the Petitioning Creditors filed the Motion to Appoint Trustee.
As set forth in the Motion to Appoint Trustee, the Alleged Debtors entered into contracts with each of the Petitioning Creditors for obstacle course construction services. The Alleged Debtors are seriously delinquent on payment to the Petitioning Creditors.
Upon information and belief, in the months leading up to the Involuntary Petition Date, the Alleged Debtors’ popularity declined and they experienced financial difficulties, resulting in increased debt, the inability to pay employees and vendors and infighting and litigation among the companies’ co-founders.
The Alleged Debtors located and identified Spartan Race, Inc. (“Spartan”), a competitor, as a potential asset purchaser. In December 2019, Spartan announced the acquisition of an option on the Alleged Debtors’ events in the United Kingdom, Canada, and Germany. Additionally, upon information and belief, Spartan apparently had discussed terms with the Alleged Debtors for the acquisition of the Alleged Debtors’ U.S.-based business. To date, a sale has not been consummated with Spartan or another party.
Based on press reports and an industry blog, and communications with the Alleged Debtors’ employees and other creditors, the Petitioning Creditors understand that the Alleged Debtors have missed payroll, ceased certain operations and had an affiliate become the subject of an insolvency proceeding in Canada. Additionally, recent efforts of the Petitioning Creditors to communicate with management have gone unanswered.
As of the Involuntary Petition Date, the Petitioning Creditors have reason to believe that absent chapter 11 protection and the immediate appointment of a trustee, operations will cease, employees will leave, and the value of the entire enterprise will be lost. The Petitioning Creditors believe that current management of the Alleged Debtors has failed to preserve the value of the enterprise, leaving creditors to watch the business fall apart.
Spartan CEO Joe DeSena commented earlier:
“The ultimate irony is TM’s greatest competitor, who battled it out with them for a decade, was the one willing to step up and invest to save Tough Mudder – keep the employees, pay the creditors, and keep operations open. It was the guys who founded it that were willing to let it die.”
Nearly $1 Million Owed to Creditors
$854,558,40 owed for “services rendered”:
- Valley Builders $307,189.53
- Trademarc Associates, Inc. $292, 454.93
- David Watkins Homes, Inc. $256,014.75
We reached out to our legal expert to provide some insight: “This emergency petition for appointing a trustee for the bankruptcy to shorten the response time. The petition is sealed, but the gist is they are trying to force TM’s hand – fast.”
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