Hoonigan Files For Bankruptcy: Future of Aftermarket Giant Uncertain

The company, which became the face of Wheel Pros, LLC, in October 2023, is seeking to restructure its operations and emerge from bankruptcy within two months under the majority ownership of its current lenders. With a plan to discharge $1.2 billion in debt and secure $570 million in new capital, Hoonigan is aiming for a fresh start under a Restructuring Support Agreement (RSA) with its creditors.

The Rise of Hoonigan and Wheel Pros

Hoonigan, known for its high-octane content and strong automotive fanbase, merged with Wheel Pros, LLC in September 2021. Wheel Pros, founded in 1994, specializes in aftermarket wheels, tires, and automotive accessories. The merger came during explosive growth for the company as it sought to expand its influence in the automotive aftermarket industry.

This acquisition was part of a broader trend for Wheel Pros, whose growth surged after being acquired by Clearlake Capital in April 2018. Between June 2018 and December 2020, Wheel Pros made five significant acquisitions, seeking to expand its operations and capitalize on growing demand. However, these expansions also led to financial challenges. The company invested over $12 million in two facilities in the U.S. in 2018 and 2020, but they proved financially unsustainable. By late 2021, Wheel Pros had to divest a large portion of one facility and close the other entirely in early 2023.

Pandemic Growth and the Road to Bankruptcy

Like many companies in the automotive aftermarket sector, Hoonigan and its parent company, Wheel Pros, experienced unprecedented growth during the pandemic. Supply chain constraints and rising interest rates led to significant financial strain. The cost of raw materials like aluminum doubled between 2020 and 2022, while demand for aftermarket parts surged. Wheel Pros’ revenue skyrocketed from $844 million in 2019 to $1.5 billion in 2022.

However, the company struggled to maintain that momentum. By 2023, demand dropped, and revenue fell significantly, leaving the company unable to meet its projected earnings targets. These challenges and mounting debt prompted Hoonigan’s decision to file for Chapter 11 protection.

The Future of Hoonigan: Restructuring and Recovery

Hoonigan's Chapter 11 filing includes a plan to discharge $1.2 billion in debt while securing approximately $570 million in new capital. The company is banking on its Restructuring Support Agreement (RSA) to streamline its operations and improve its balance sheet. CEO Vance Johnston has emphasized that Hoonigan's goal is to continue normal business operations throughout the bankruptcy proceedings. The company aims to protect its employees, customers, vendors, and suppliers from the impact of the restructuring.

Despite the current financial challenges, Hoonigan remains optimistic about its future. The restructuring process is designed to help the company emerge from bankruptcy stronger and more financially stable. With the support of its lenders and stakeholders, Hoonigan is looking to continue as a major player in the automotive aftermarket and motorsport industry.

What’s Next for Hoonigan and Wheel Pros?

The next two months will be critical for Hoonigan as it navigates the Chapter 11 bankruptcy process. The company’s ability to secure new capital and restructure its debt will determine its future in the competitive aftermarket automotive sector. If successful, Hoonigan may be able to emerge from bankruptcy with a leaner, more efficient business model.

While the road ahead is uncertain, Hoonigan’s commitment to maintaining its brand identity and serving its loyal fanbase remains clear. As the court proceedings unfold, the company’s next chapter will be defined by how it handles its financial restructuring and whether it can return to its former glory in the automotive industry.