UPDATE 11/23: The Investigation Division of Taiwan's Ministry of Justice is investigating a $20 million January investment by Taiwan-based Ideal Bicycle Co. in bicycle distributor Advanced Sports Inc., the Inquirer has confirmed.
The company, which has its offices and a warehouse in Northeast Philadelphia, filed for bankruptcy reorganization Nov. 16, along with its parent company Advanced Sports Enterprises, and put its assets up for sale. That happened the week after Madeleine Dean, wife of Advanced Sports chief executive and part-owner Patrick Cunnane, was elected to represent the newly redrawn Fourth Congressional District, mostly in Montgomery County.
The January investment gave Ideal 50 percent ownership of Advanced Sports Inc., according to Cunnane's statement to the bankruptcy court. The $20 million — half in cash for inventory (including bicycles that Ideal makes in mainland China) and half in debt forgiveness — was more than Advanced Sports Inc.'s value as calculated from Dean's campaign finance disclosures to Congress in April and October.
The investigation, by a Taiwan government bureau that polices securities sales and investments by Taiwan companies, was reported by Taiwan media and independently confirmed by the Inquirer. Ideal officials in Taiwan have not responded to emails seeking comment, and government officials declined to discuss any details of the probe.
NOV. 19: Advanced Sports Enterprises, the bicycle sales group headed by Patrick Cunnane, the husband of U.S. Rep.-elect Madeleine Dean (D., Montgomery), has filed for Chapter 11 bankruptcy protection. The company now plans to put its warehouses, stores, and bike brands — including Fuji, Kestrel, Breezer, Tuesday, and SE Bikes — up for sale in an auction scheduled for Dec. 18.
The petition was filed at federal bankruptcy court in Durham, N.C., near ASE's headquarters, on Nov. 16, nine days after Dean's election victory over Republican Dan David to represent the newly drawn Fourth District in Congress.
The filing also came 10 months after Taiwan-based bicycle manufacturer and exporter Ideal Bicycle Corp. invested $20 million in ASE's wholesale business, Advanced Sports Inc. of Philadelphia, which is also headed by Cunnane. Advanced Sports Inc. also filed for bankruptcy, along with other ASE affiliates.
ASE plans to close at least 40 of its 104 Performance Bicycle retail stores in 20 states. Other assets for which it has sought buyers include a 70,000-square-foot wholesale office and warehouse operated by Advanced Sports Inc. at 10940 Dutton Rd. in Northeast Philadelphia. That company also operates a leased 50,000-square-foot warehouse next door, and another in California, and employs 83 people. Most of ASE's 1,944 employees work in Performance Bicycle retail stores.
"As you know, retail is very difficult right now — but we are confident that this reorganization is the right move, and optimistic about the business," Cunnane said in an email.
"ASW would likely run out of cash in January" without new funding or debt relief, Cunnane told the bankruptcy court. While calling ASE's vertically-integrated bicycle sales model still "fundamentally sound," he added that the company's "current debt structure has greatly affected its business operations," especially during the bicycling offseason, which he said runs roughly from October through March.
The company's debts include $37.9 million to banks led by Wells Fargo; $37 million to Ideal and its affiliate Econotrade, as trade creditors; $20.4 million to York Street Mezzanine Partners II, LP, which manages investments for the Ontario Teachers' Pension Plan, of Canada; and $7.4 million to Hong Kong-based Advance Holding Ltd.
According to bankruptcy documents, Cunnane's company wants to cancel "underperforming" store leases, and to get out of contracts to buy bikes from Ideal Bicycle, which has its main plant in Dongguan, Guangdong, mainland China, plus others in Poland and Taiwan. That way, ASE can sell its brands and businesses profitably and let the buyers negotiate new manufacturing deals, enhancing potential profits and increasing sale prices.
Cunnane last summer testified against Trump tariffs on Chinese bike imports that make Ideal bikes more expensive in the U.S., but his company didn't cite those tariffs in its bankruptcy filing. Dean has also criticized Trump trade policy. (Added Nov. 20)
In her House of Representatives financial filings, Dean listed her husband's stake in ASE and in its majority investor, British Virgin Island-based Jadeland Pacific Ltd., as the couple's most valuable assets, worth a total of between $1.25 million and $5.5 million. As CEO, Cunnane is paid $415,485 a year.
Bankruptcy documents show that the financial reorganization has been in the works for months, even as Dean was noting her husband's business success in campaign appearances. A lawyer turned college English teacher and state legislator, Dean was general counsel for a predecessor bike company in the 1990s but hasn't worked for Cunnane since, he said.
Since May, investment bankers working for Cunnane's companies have heard from 84 potential buyers, including private-equity funds, rival bike companies, and professional liquidators, according to his court declaration.
ASE was set up in 2016 as a holding company for Advanced Sports Inc. and other bicycle businesses after Cunnane and his investors obtained a $90 million Wells Fargo & Co. line of credit with an additional $7 million from Ideal and purchased the North Carolina-based Performance Bicycle store chain, which then was heavily indebted to Cunnane's wholesale company.
Ideal had previously invested $4 million with Advanced Sports Inc. in 2004, shortly before opening its plant in China, to produce bicycles for export, using labor paid wages currently advertised at $2.20 an hour.
Among nonbank creditors listed in bankruptcy documents is PIDC Regional Center, a Philadelphia-based program for foreign investors to gain U.S. legal status. PIDC officials, Cunnane and his bankruptcy lawyer have not responded to a request for information about the company's involvement with that program.