Champ Car files bankruptcy

Champ Car Wednesday filed Chapter 11 bankruptcy, igniting what could potentially be a bidding war for its assets. The Indy Racing League last month agreed to acquire certain assets of Champ Car, but the bankruptcy court could open things up. “To the extent that another buyer would come in and pay more, that would be better for the creditors,” said Jeffrey A. Hokanson, an attorney with the Indianapolis-based law firm Hostetler & Kowalik, which represents Champ Car. If another bidder offered a higher amount, Hokanson said IRL officials could counter offer. “It can amount to an auction,” he added.

But motorsports experts don’t expect another suitor to swoop in this time. “A judge certainly has the right to hand it over to another buyer if one shows up, but I don’t anticipate that,” said Tim Frost, a Chicago-based motorsports business consultant. “This is part of the procedural motions Champ Car had to go through to make the transaction with the Indy Racing League happen. I believe this is the final chapter of open-wheel unification.”

A likely scenario, Hokanson said, is for the bankruptcy to be used as a tool to complete the IRL-Champ Car unification, and to sell the remaining assets such as engines, chassis and office furniture and supplies to satisfy creditors.

The filing, submitted in U.S. Bankruptcy Court in Indianapolis, showed that the Indy Racing League essentially paid $10 million for all of Champ Car’s intellectual property rights, a mobile medical unit and a non-compete agreement and consulting fee for Champ Car co-owners Gerald Forsythe and Kevin Kalkhoven. The filing, however, states that Forsythe and Kalkhoven would use $4 million to promote the Long Beach Grand Prix in April.

The filing indicates Champ Car has between $10 million and $50 million in assets and owes between one and 49 creditors between $1 million and $10 million. Most of the assets likely have a very limited number of potential buyers, which could bring the value down. The creditor with the largest claim is Cosworth Inc., a California engine maker owned by Kalkhoven and Forsythe, which is owed $1.83 million. Several of Champ Car’s former teams are owed money, including PKV Racing, which is owed $645,883; RuSport Inc., which is owed $424,861 and Forsythe Championships Racing, which is owed $327,961.

Today, Champ Car lawyers moved in court to keep paycheck flowing to 20 Champ Car employees, who are responsible for preparing for the race in Long Beach.

Will open-wheel unification truly happen this time?