It’s been a rough year for iconic car brands like Recaro and BBS, and now another one is in financial trouble. Less than a year after Wheel Pros rebranded itself as Hoonigan, stripping brand equity from the motorsports, merchandise and media company to further its own ends, the firm now known as Hoonigan filed for bankruptcy on Sept. 8.
It’s a disappointing but not surprising turn of events for a brand devoured by private equity, but the good news is that the Hoonigan name isn’t disappearing.
Here’s what the firm stated in a media release:
Wheel Pros, LLC (d/b/a Hoonigan) and certain of its North American-based affiliates (collectively “Hoonigan” or the “Company”), a leading provider of aftermarket vehicle enhancements, today announced that it has commenced an in-court financial restructuring process to position it to drive long-term growth. The Company has entered into a Restructuring Support Agreement (“RSA”) with a majority of its debtholders through which it expects to eliminate approximately $1.2 billion of the Company’s debt and secure up to approximately $570 million of new capital, substantially improving the Company’s balance sheet and financial position.
Here’s something shocking: that $1.2 billion in debt is only a portion of the total $1.75 billion in debt on the company’s books. Holy hell, how on earth did this happen? Well, part of it might be due to relentless acquisitions. Under the backing of Clearlake Capital, Wheel Pros went on an acquisition tear, gobbling up brands left and right.
In 2021, Wheel Pros acquired Hoonigan. In early 2022, Wheel Pros acquired the throtl e-commerce platform for car parts, and Dilshat Erkin, a VP at Clearlake Capital, described the event in a media release as “Wheel Pros’ third acquisition in the last six months.” A few months later, it bought Transamerican Auto Parts from Polaris, diving deeper into the world of off-road accessories. If you aren’t immediately familiar with Transamerican Auto Parts, it owns 4 Wheel Parts and its affiliated house brands, including Teraflex suspension, Smittybilt, Rubicon Express, G2 Axle and Gear, and Pro Comp. Acquiring that many companies in that short a timespan require either substantial cash reserves or, as the kids on Wall Street say, levering yourself to the tits. It wouldn’t be surprising if some of these acquisitions used a leveraged buy-out model, i.e. growing quickly using the cash of others.
However, even with an overabundance of brands under its umbrella, I’d have expected Hoonigan to still accrue some solid revenue, so where the heck did it go? Well, while salaries at privately held firms are opaque, private equity’s general modus operandi is to pump money into companies, extract profits, and then package off assets, either for a profit (via sale or public offering) or, sometimes, through bankruptcy.
Due to the goal of a quick turnaround, these arrangements often come with absurd growth targets, cultural disruption, and cost-cutting that can seriously scare off talent who helped build brands to what they were before they sold out. Simply look at the lineup of Hoonigans who’ve left over the past year or so, from Vin Anatra to Hert to Zac Mertens to Brian Scotto himself. It’s been a sad arc for the Hoonigan brand, made sadder by the number of brands attached at the hip to Wheel Pros.
Just to get a sense of the scope Wheel Pros has, let’s list off its brands real quick: American Force, American Racing, Asanti, Black Rhino, DUB, EFX, Fairway Alloys (you know, for golf carts), Foose, Fuel Off-Road, Gorilla, Helo, Kinesis, KMC Wheels, Motegi, Moto Metal, MSA Offroad Wheels, Niche, Performance Replicas, Petrol, Poison Spyder, Pro Comp, Rotiform, Smittybilt, Status, TSW, U.S. Mags, XD Wheels, Headlight Revolution, Morimoto, The Retrofit Source, G2 Axle and Gear, Logiq Air Suspension Solutions, Readylift, Rubicon, Teraflex, Zbroz, in addition to Hoonigan, Throtl, and the aforementioned 4 Wheel Parts digital and retail stores.
In among that mix are some hugely popular brands, so anyone looking to buy a set of Rotiform wheels or Morimoto projectors is probably wondering what happens next. Well, thanks to falling under Chapter 11, operations will continue for now, and overseas activities will remain unaffected. In the medium term, here’s what will probably happen: Hoonigan has filed a pre-packaged restructuring support agreement, and if creditors agree to the terms, they could take majority ownership of the company under the terms of the restructuring agreement. Should everything go according to plan, operations won’t be suspended, although it’s hard to say in certain terms what this means for Hoonigan as a media house.
Now, there is another potential outcome — things don’t go as planned. If the court in Delaware doesn’t find that the restructuring agreement is feasible then liquidation may be required. However, pre-packaged restructuring agreements have a pretty good historical track record of court approval, so it’s likely that the lights will stay on, albeit with different forces guiding the ship. Mind you, not every asset might remain with Hoonigan, even if everything goes well. For example, Business Wire reports that Hoonigan is getting rid of 4 Wheel Parts and its associated assets, along with the Poison Spyder brand, signing a purchase agreement with the American subsidiary of Australian off-road parts firm ARB. However, don’t expect any interruptions in operations over there.
As it stands, there’s a 60-day window for approval of the restructuring agreement to be reached, so we should know by early November exactly how things will proceed. Even in a worst-case scenario, the brands involved still have equity and someone will want to acquire them, but even in the best-case situation, the cycle of private equity ownership likely won’t be broken. To get a picture of how long this purgatory could last, look at BBS Wheels, the German division of which has declared insolvency five times since 2007. The Hoonigan name is more likely than not to carry on, but it probably won’t be what we’re used to.
(Photo credits: Hoonigan, Rotiform)
Support our mission of championing car culture by becoming an Official Autopian Member.
-
Did Private Equity Push Recaro Into Bankruptcy?
-
Why So Many Major YouTube Channel Hosts Are Quitting And What It Says About Media
-
Fisker Bankruptcy Shows It Owes Millions To Adobe, Google, And NBC Universal
-
Bankrupt Fisker Just Had To Recall All Its Cars And It’s Not To Fix Software
-
Famous Wheel Brand BBS Just Declared Insolvency For The Fifth Time Since 2007
Got a hot tip? Send it to us here. Or check out the stories on our homepage.
Old trick in the book: snap up functioning, revenue-healthy companies (profitability is secondary) and immediately stop paying bills while shoveling incoming money from said revenue to parent company as per acquisition terms (pe fund, venture etc). When creditors come, declare bankruptcy, give bird instead and sell the parts for whatever their logos are worth.
Very much so like taking cash from the atm on someone else’s credit card.
What’s really special here is the scale and speed at which they pulled this off – likely before the companies could figure out what’s happening.
All this is legal and encouraged in whatever society we have in the land of the free. Now, let’s talk about butterflies and cotton candy please?
I used to work for a mail-order/online sales company which had been around for a while. We were bought buy private investors like this, they spent a bunch of cash and sold us to another company, who put us all out of a job. That all took about five years. That was the best job I’ve ever had, too.
Back in the day, rather than calling it “an acquisition”, it was referred to as “a bust out”. And instead of “private equity”, it was called “organized crime”. Enough lawyers and ad men in a room can make anything sound legit.
They should just treat private equity like student loans and not let private equity companies go bankrupt, you know, make those people personally responsible .
I wish there were lawyers interested in doing that. If we have to treat corporations like people, they should have their huge debt saddled to them like people have student loans. No way to go bankrupt and get off free PE firm, you are a person now.
Any company that does that to a BMW Estate, and so many others, deserves to go toes up.
I guess it costs $1.75 Billion to make a Fiesta go that fast.
Honestly, it’s a big middle finger to Block’s legacy that this $1.2 bil of debt doesn’t include, like, an ex-Paris-Dakar Porsche 959 that’s been jumped on the moon.
I really need to buy a company, pay myself a salary of 1 trillion dollars then file for bankruptcy.
Here’s a reminder that Clearlake is also the majority shareholder of Chelsea FC which has been spending like no tomorrow on footballers, hoping that FFP doesn’t bite them in the ass.
I knew I recognized that name before!
Chav$ki and Clearlake deserve each other.
Clearlake made Abramovich look good.
I’d totally rep a Hoonibroke bumper sticker.
Hoonigone
That seems to be the direction the Hooniverse is heading, if the barely populated comment section is any indication.
They could use some traffic, and this stellar land yacht is worth checking out:
https://www.hooniverse.com/wagon-wednesday-this-dodge-monaco-delivers-the-goods/
(Anyone ever seen Jeff G around here?)
Aw, man. I like Hooniverse. Heck, I used to do the DFL Show with a couple of friends over there. I’m glad they haven’t sold to PE craplords, but then again, I always assumed it was kind of a passion project for Glucker. (I have no idea, though. I just know he’s good people.)
Am I wrong and or delusional but why are these things or scams let’s say allowed to go on and on almost daily it seems?
Citizens United legally says companies are “people” and can donate as much as they want to the politician of their choice, therefore, all the private equity pirates have to do is find a company ripe for the picking, target it, obliterate it, profit, and repeat. Why? Because it’s legal thanks to the politicians they donated to. It’s what happened to Toys R Us and several other companies.
And yet 99.9% of people on this planet cannot get away with blatant grand theft.
Seems like BigLots just got the same treatment today as well
Taking a Youtube channel that sells bumperstickers and saddling it with 2 billion dollars worth of debt is basically asking to get screwed by the legal system though. But nobody really faces consequences in the US anymore though so…
They didn’t saddle the YouTube channel with 1.75B debt. They already had a private equity company, they renamed it to Hoonigan because of the brandrecognition and then loaded that PE company with debt.
My only question is what idiots have been loaning them the money to rack up this amount of debt, and how do I short them?
That’s exactly what I’m thinking: Who’s on the other side of this?
Not idiots. They are getting the 1.2 billos the companies now owe.
1.2 billion in restructured debt is not the same thing as 1.2 billion in hard cash. It could be significantly less, and the opportunity cost for the creditors is also significant. I have no doubt the creditors will be taking large write downs, even if they do make some sort of recovery in the end.
Right except my suspicion is that the debt occurred because they created tiered, more senior obligations to their corporate lenders.
Highly likely, I want to know who’s dumb enough to be at the bottom of the cake.
That’s the whole point as I understand it; you book the loss for the tax advantage but it was all imaginary money anyway.
Who would’ve thought you could go bankrupt with a portfolio consisting solely of the most mid automotive aftermarket companies of all time? They should buy NRG next.
How does a brand that just makes stickers and t-shirts amass that much debt?
It doesn’t.
Hoonigan was bought by Wheels Pro, LLC in 2001 which is an aftermarket rim company that has been around since 2003. Wheels Pro LLC has been owned by several private equity groups and has been acquiring wheel companies and brands for years prior and after acquiring Hoonigan.
Last year, Wheels Pro LLC decided to slap lipstick on the pig of a company it is and rebranded itself Hoonigan. Hoonigan probably makes up little of the companies revenue, or related debt, but now bears the cross of its parent company. The PR spin is that it was a merger but some of the more official filings states Hoonigan became a subsidiary of Wheels Pro, LLC after the “merger”.
That’s one way to say you didn’t read the post.
Who knew there was no money in Hooning?
The end of Prohibition killed it!
There likely was, but private equity firms are the Aussie killjoy cops of the financial world.
Remember kids, this is all happening because obscenely rich dickheads aren’t making enough money fast enough!
I only regret that I don’t know how to be an obscenely rich dickhead.
It’s completely your own fault. You should have chosen your parents better.
“Yes, the planet got destroyed. But for a beautiful moment in time we created a lot of value for shareholders.”
I hate these guys with the passion of a thousand burning suns, but often the biggest PE investors are public pension funds.
We aren’t whiter than white either.
PE is scourge upon our nation. How in the everliving F*** does a YouTube channel end in this level of debt on its own???
They don’t. Their name and identity did. The PE bought the brand, and then pasted it on their holding company.
Exactly. The Mob had more morals.
Haha. You think PE has morals. 😀
Touche’
Isn’t this just the function of private equity firms? No company can legitimately grow fast enough to meet their goals. It will always end this way.
This is the part of Goodfellas where they burn the restaurant down.
Livin’ life one quarter
mileat a time.Heh, they stole the liquor and furnishings out the back door first.
Oh, you had a fire? Fuck you, pay me.
Hey, I bought several t-shirts a few years ago, along with a Scotto’s Bolt Restoration Service hat. It’s not my fault they blew through that money already.
…Fairway Alloys (you know, for golf carts)…
I found out about the surprisingly large world of custom components for golf carts quite inadvertently. My HMV Freeway uses the same brakes as certain early ’80s models of E-Z-Go golf cart, so several years ago I ordered the parts I needed from a golf cart specialty supplier. This, as it turned out, put me on their mailing list. Catalog after catalog started arriving in the mail and kept coming for years. The first few provided an interesting glimpse into what’s out there, which is a lot, but eventually I just wanted them to stop. For all I know they’re still coming to my old address but they haven’t found my new address. Yet.
I’ve seen a couple of documentaries on The Villages, where I learned of the vast range of custom golf carts.
I was about to say: hooooo boooooy, The Olds go WILD for this kind of thing. I guess when the kids get your license taken away and you’ve still got the kind of disposable income that most of my generation will never see, you’ve got to blow it on something.
I think Jeepers have noticed that Smittybilt products have disappeared from retail. I don’t give any flips about Hoonigan or the other brands but Teraflex had better survive intact.
I was looking for some dimensions on the Smittybilt rack I have on my XJ last week and noticed that they seemed to have dropped off the map…now it makes more sense
Damn, that’s wild. Those parts are eeeeeeverywhere.
“Shittybuilt” is a good nickname for the private equity firm that managed to lose money with that, though.
More like Hoonican’t, amirite? (sorry, it was right there…)
Also, my knowledge on such matters is based almost exclusively on repeated viewings of the movie Wall Street, but I believe that “as the kids on Wall Street say, levering yourself to the tits” should probably be “leveraging yourself to the tits.”
Private Equity, what happens when capitalists’ are allowed to run amok unburdened by the rules set in place to avoid another great depression.
Story old as time…
Song as old as rhyme
Money and the beast
But they are job creators! The government is the problem! Something something lazy poor people!
A few rich guys got richer though. Who cares about the casualties?
Yay unrestricted capitalistic takeovers!
So let me get this straight:
1) buy up a bunch of B-list brands
2) pay for each one by gutting the previous one or taking out massive loans
3) get rich
4) declare bankruptcy
5) repeat.
Is that about right?
…and that’s how you do the Private Equity Shuffle.
Don’t be silly, you gut the company you bought AND saddle them with massive debt before returning the capital to the investors then bankruptcy.
I utterly despise this shell game. While I wish doing so didn’t affect the common worker, it did. But, besides them, I wish these corporate fuckers to be tossed into one of those giant sinkholes. All that money went somewhere, and that place was not the right one for the common worker. HATE HATE HATE.
I feel like there’s too many opportunities to escape a sinkhole. Fire them into the sun instead.
The downside of that is that, somewhere somehow, we would need them to get there. It would require some collaboration between us, and NASA/Boeing/SpaceX.
Meanwhile, any proletariat group would be able to stick them into the bed of our pickups or race car trailers and drive them to said sinkhole, and use a trebuchet to launch them into the center. We can then setup shift to monitor their possible escape, and refire them back in should they succeed.
if they got loans they had to underwritten. and if they go BK then the entities that provided the loans will have a defaulted loan on their books.
I think it was common knowledge that the death of Ken Block was going to lead to the death of Hoonigan. That, combined with the huge number of large automotive channels that have been gobbled up by big business leading to all the talent and soul leaving. Donut, Hoonigan, Motortrend, all have been on the decline and bleeding what made them great to begin with. I am optimistic about the future as many of these creators can now do their own thing and get back to making quality automotive content instead of content designed for maximum virality at the cost of quality and depth.
I believe this company only licenses the Hoonigan brand from the racing organization, which remains owned by the Block family
Correct, and the racing team will likely continue. But the media side is on a steep decline with essentially all of the major talent having gone elsewhere in the last year.
Wheel Pros renaming themselves to a brand owned by the Block family seems odd. Do you have any source that I could check?
I do not think that there was common knowledge (?) of the death of Ken would lead to the death of Hoonigan. You must be more common than me.
Yeah — the death of Ken was tragic, but I enjoyed the other Hoonigans’ antics as well. Ken had taken a step back from the daily workings of the media side a while ago anyway, so it was the rest of the crew who’d been taking the idea and running with it, and they were a blast to watch in Hoonigan’s heyday. Maybe there was less pushback against bad PE-firm ideas when Ken was still in the picture, though? I don’t know. He and the other Hoonigan heads stayed on for a while post-acquisition.
I enjoyed the hell out of the non-Ken content, too, although I noticed that Hoonigan’s content’s become a lot more formulaic after the private equity firm takeover, and rapidly so after Ken’s passing. I don’t have any insight into the background there, but that all-the-drag-races turn doesn’t seem like a coincidence given that the Donut crew complained about the same kind of thing — specifically, the PE firm pushing for what’s made numbers in the past instead of the creatives having the leeway to try whatever sounds fun. I miss the random vehicular scumbaggery days where someone would just drop in the shop, show off a weird car and/or rip fat burnouts.
Private equity entering the situation should’ve been a huge red flag, though. I know Block wanted to sell and move on, but gosh, never, ever trust a private equity firm even if they pinkie-swear to treat your company well. Ever.
Well, I agree? Don’t have much to add to the convo. Well said.