Thursday, March 6, 2008
Champ Car World Series files for Chapter 11 bankruptcy
By John Oreovicz
Special to ESPN.com
INDIANAPOLIS -- Attorneys representing parent companies for the Champ Car World Series filed Chapter 11 paperwork in United States Bankruptcy Court on Wednesday.
The open-wheel racing series is set to stage its final event on April 20 in Long Beach, Calif. Champ Car intends to continue in the management and possession of its business and property as a debtor-in-possession until assets can be sold to pay off creditors.
Champ Car World Series LLC estimated it carries debts of less than $10 million, topped by $1.825 million owed to engine manufacturer Cosworth Inc. Company assets are estimated at $10 million to $50 million.
The filings contain additional business details about the unification of American open-wheel racing under the Indy Racing League banner.
An affidavit from Gene Cottingham, vice president and chief financial officer for Champ Car World Series LLC, stated that the company's four-man board of managers "determined that it is no longer economically feasible to sustain an open-wheel series and that [Champ Car] did not have the funds to operate the series in 2008."
The board of managers comprises Kevin Kalkhoven, Gerald Forsythe, Paul Gentilozzi and Dan Pettit. Champ Car's majority owners are Kalkhoven (through a company called 21st Century Racing Holdings LLC) and Forsythe (and his company Willis Capital LLC).
Cottingham further noted that Champ Car determined " ... it is in the best interests of the sport of open-wheel racing in general to sell certain assets to the IRL and to unify the sport of Indy-style open-wheel racing under the IRL, all before the start of the 2008 season."
The affidavit revealed that the Champ Car board of managers authorized the decision to file for bankruptcy on Feb. 14, exactly one week before Kalkhoven and Forsythe executed a "Memorandum of Understanding." The memorandum directs Champ Car to assign race sanctioning contracts and sell substantially all of its intellectual property and other intangible assets, as well as the Champ Car Mobile Medical Unit, to the IRL for $6 million.
The memorandum includes a non-compete covenant for Forsythe and Kalkhoven, who are each slated to receive an additional $2 million, provided they pay certain expenses associated with the promotion and operation of this year's Long Beach race; and show commitment and support of the IRL.
The agreement also calls for the long-term preservation of the Long Beach race, which is managed by a holding company owned by Kalkhoven and Forsythe called Aquarium Holdings LLC. The cost of staging this year's Long Beach race will be shared by Champ Car, the IRL, and Kalkhoven and Forsythe.
The IRL has assumed responsibility for production and telecast costs for the Long Beach race, which is scheduled to be broadcast on ESPN2.
"The cooperative effort to stage the Champ Car finale will preserve the goodwill associated with the Long Beach race, and help to ensure that IRL can add Long Beach to its schedule beginning in 2009," stated Cottingham.
Coincidentally, Champ Car's four-year history started in the same branch of Federal Bankruptcy Court on Feb. 2, 2004, when Judge Frank J. Otte approved the sale of the assets of Championship Auto Racing Teams, Inc. to an ownership group formed by Kalkhoven and Forsythe.
Judge Anthony J. Metz III has been assigned to preside over Champ Car's current case.
John Oreovicz covers open-wheel racing for National Speed Sport News and ESPN.com.