Divvy supplier files bankruptcy

BY FRAN SPIELMAN City Hall Hall Reporter January 20, 2014 4:41PM

The company that supplies bicycles, stations, docks and software for Chicago’s Divvy bike-sharing program filed for bankruptcy Monday, casting a cloud over an ambitious expansion plan.

The Public Bike System Company’s decision to seek federal protection from creditors owed millions forced the city of Montreal to take over its local bike-sharing program to protect its investment.

The development was announced Monday by Montreal Mayor Denis Coderre and reported by the Canadian Broadcasting Company and the Montreal Gazette.

Three years ago, the Montreal City Council rode to the rescue of Public Bike System, also known as Bixi, by approving a $108 million bailout package.

It included a $37 million loan to cover the company’s operating deficit and $71 million in loan guarantees Bixi hoped to use to expand into other cities.

On Monday, the CBC quoted Coderre as saying his city would seize control of the troubled company’s $11 million in local assets, rather than sink even more money into it.

“If Bixi can be saved, It’s through the Bankruptcy and Insolvency Act,” the Montreal mayor was quoted as saying.

The CBC quoted the troubled company as tying its cash-flow problems to the development of “new proprietary technology for international clients.”

The story further claimed that “persistent delays and problems with the technology” had prompted “many clients,” including Chicago, to withhold payments. Chicago and New York together owe Bixi $5.6 million, according to the CBC.

Until Monday, Chicago’s Divvy program appeared to be rolling along smoothly with the only hiccup being Chicago’s heavy snow and record cold.

In November, Mayor Rahm Emanuel’s office announced plans to use a $3 million federal grant to add 75 more stations. At the time, the program had already resulted in 650,000 trips over 1.5 million miles and sold more than 125,000 daily passes and 11,000 annual memberships.

The 75 stations planned for next year would have made Chicago’s bike-sharing program the largest in North America — bigger than New York and Montreal.

But, Monday’s bankruptcy filing by Divvy’s supplier calls the expansion into question.

City Hall and Ron Burke, executive director of the Active Transportation Alliance, had no immediate comment, either on the bankruptcy filing or the city’s apparent decision to withhold payment from Bixi.

Elliot Greenberger, deputy general manager for Divvy Bike-Sharing Chicago, could not be reached.

Two years ago, the Emanuel administration delayed the launch of Chicago’s bike-sharing program as Inspector General Joe Ferguson continued to investigate a rival bidder’s claim that the bid process was greased for Alta, an Oregon company that once hired newly-departed Transportation Commissioner Gabe Klein as a consultant.

At the time, problems with Alta’s newly-developed Bixi software to keep track of rented bikes and accept rider payments had also stalled the company’s 10,000-bike rental program in New York.

But, the Emanuel administration insisted then that neither complication played any role in the Chicago slowdown.