The majority shareholder of Tough Mudder, Will Dean, and its board of directors have consented to bankruptcy proceedings for the company, making a speedy sale to rival mass participation business Spartan more likely.
A motion filed with the United States Bankruptcy Court of Delaware states that Tough Mudder’s board of directors will not oppose a petition for Chapter 11 reorganisation of the company by its creditors and will not stand in the way of a sale to Spartan.
On 7 January it emerged that the obstacle racing event organiser is the subject of Chapter 11 Bankruptcy proceedings in the US after three companies – Valley Builders, Trademarc Associates and David Watkins Homes – filed a petition in the United States Bankruptcy Court of Delaware, claiming they are due a total of $854,558.40 (€765,893.36).
The latest consent motion appears to end a standoff between Tough Mudder’s co-founders, Will Dean and Guy Livingstone, and the company’s largest lender Active Networks over the sale of the company. Dean and Livingstone were accused of ‘a game of brinkmanship’ and of ignoring the best interests of these creditors in holding out for $44m to sanction the sale to Spartan.
In a statement submitted to the bankruptcy court on 9 January, Spartan complained that the inter-company dispute had rendered Tough Mudder incapable of continuing operations and risked damaging the value of the business.
The co-founders now appear to have backed down in their demands. The motion states that board of directors consent to the motion for the emergency appointment of a trustee, as filed by the creditors, and consent to the sale to Spartan through a court approved order. The board of directors agree that the resolutions are irrevocable and cannot be reversed in the motion.
SportBusiness understands Spartan made a ‘seven-figure offer’ for Tough Mudder which includes provisions to write off the liabilities to the three creditors as well as its debts to its largest lender, event registration software company Active Networks, thought to be in the region of $18m. Dean and Livingstone stand to make around $1.5m from the deal.