Illinois-based Hobbico, Inc. sought chapter 11 bankruptcy protection yesterday in Delaware. Its goal? To continue a sale process started late last year.
The Bankruptcy Sale
The company says it is “actively” discussing a sale with potential buyers. (Translation: It does not yet have a commitment from anyone.) Hobbico’s prepetition lenders are financing the sale effort. They are calling for the following sale schedule:
- Sale procedures by March 9;
- A bankruptcy auction by March 26; and
- A sale closing by April 5.
Events Contributing to the Bankruptcy
The company blames its bankruptcy on various events, including:
- High leverage due to various acquisitions;
- Lagging product innovation;
- An underdeveloped e-commerce platform;
- An increasingly competitive drone market;
- Vendor issues; and
- Depressed sales.
These factors eventually triggered defaults with the company’s secured lenders. They also lead to a deadly spiral of constrained liquidity, inventory shortages, and falling sales.
JND Corporate Restructuring is the claims agent. The case is assigned to Judge Kevin Gross (case number 18-10055 (KG)). Information about the Committee formation meeting is available here.
Hobbico designs, manufactures, and distributes drones, radio controlled vehicles, and other cool hobby products. I wanted to post pictures for you, but I can’t find any on their website. (Underscoring my earlier point about their underdeveloped internet presence.) But the website does identify many of their 250 brands. These include Axial, ARRMA, Revell, Estes, Great Planes Model Manufacturing, DuraTax, and Top Flite. Based in Illinois, the company has operations and facilities in California, Colorado, Illinois, and Nevada.
Tower Hobbies is the company’s retail arm. It is also their highest margin distribution channel. Revell, Estes-Cox, and United Model make up its mass market business. And Great Planes represents the company’s wholesale operations. Besides its own trademarks, the company licenses various trademarks.
Wait…! Their drones and other toys are featured on the Tower Hobbies retail website. Too bad Christmas is over….