Cannondale has announced that it intends to file a voluntary petition for reorganisation under Chapter 11 of the US Bankruptcy Code today. That essentially means that, if the US Bankruptcy Court agrees, Cannondale will be free of the burden of paying off creditors while they sort themselves out. Cannondale's lenders have agreed to provide the company with interim financing to fund operating expenses and pay suppliers and employees.

There's a catch, though - part of the deal is that Cannondale sells "substantially all of its assets" to its main lender, Pegasus Partners. Assuming everything is approved by the courts (and no-one else steps in with a better offer), Pegasus would operate the bicycle business as a going concern. Pegasus would also separately buy the motorsports division. Meanwhile, Cannondale's management "continues to work with other potential interested buyers for either or both of these businesses". And the interim financing will only be used to keep the bicycle business going.

Motorsports activities are suspended pending a potential sale. Founder and President of Cannondale Joe Montgomery said, "The motorsports division was threatening the bicycle division. Although we believe in the value of our motorsports products we did not have sufficient resources to make the additional investments necessary. We look forward to bringing a renewed focus to our core bicycle business and to working through this present challenge with the greatest possible speed."

What does all this mean for Cannondale's employees, many of them temporarily laid off in December? Production workers at the motorsports factory won't be recalled, while those at the bicycle factory will be returning to work "in the near future".