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Lack of Popularity Drives Golfsmith International Holdings to Insolvency

Author: Joel R. Glucksman|October 12, 2016

Lack of Popularity Drives Golfsmith International Holdings to Insolvency

Golfsmith International Holdings Inc., one of the largest golf apparel and equipment chains in the U.S., recently announced that it filed for Chapter 11 bankruptcy protection. According to Bloomberg, the golf giant is currently negotiating the sale of a portion of its brick and mortar retail locations

Golfsmith International Holdings’ debt load mounts

In its bankruptcy documents, the company claimed the decline of golf’s popularity throughout North America was to blame for its loss of revenues. This drop in the sport’s interest coincided with its failed attempt to expand operations in 2011 which involved the construction of larger stores with higher operating costs. 

Golf’s popularity never experienced a resurgence to its previous levels in the early 2000s. Part of this decline was attributed to the fall of Tiger Woods as the sport’s top star, which caused younger audiences to become less interested in the sport. In fact, according to National Golf Foundation data cited by Bloomberg, golf participation dropped by more than 1.6 million players from 2015 to 2011. As a result, the company accumulated both assets and debts up to $500 million. Part of Golfsmith’s debt load includes more than $100 million on a loan and over $95 million in second-lien notes owed in 2018.

The reorganization plan for Golfsmith International Holdings

Metro News Canada reported Golfsmith will attempt to sell a portion of its chain locations, subject to court approval. Specifically, the company’s two senior lenders, Fairfax Financial Holdings Ltd. and CI Investments Inc., have offered to buy Golfsmith’s Canadian Golf Town stores. However, if the company cannot reach this deal, it will shut down a portion of its stores, and liquidate a portion of its remaining assets. 

The Wall Street Journal reported Golfsmith’s U.S. business took the bigger hit from the drop in interest in the sport. Meanwhile, the Canadian stores have a larger share of the market, thus making them more valuable to Fairfax and CI.

The Golfsmith operation in the U.S. is currently seeking a $135 million loan from a venture capital firm to finance operations, The Journal found. If the court approves the loan, the company plans to close its lowest performing stores and reorganize its debt load. Golfsmith also plans to emerge from the bankruptcy process as a viable business model.

The significance of the Golfsmith International Holdings filing

Golf is losing popularity at record rates, which has caused a ripple effect throughout the sport’s retail sector. In fact, Bloomberg reported that Nike Inc. and Adidas AG have decided to halt sales of golf equipment and leave the sport altogether. Furthermore, following Sports Authority’s bankruptcy filing, that originally called for the close of underperforming store locations, golf’s dropping popularity resulted in a full asset liquidation sale.

Are you a creditor in a bankruptcy?  Have you been sued by a bankrupt?  If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.

Lack of Popularity Drives Golfsmith International Holdings to Insolvency

Author: Joel R. Glucksman

Golfsmith International Holdings Inc., one of the largest golf apparel and equipment chains in the U.S., recently announced that it filed for Chapter 11 bankruptcy protection. According to Bloomberg, the golf giant is currently negotiating the sale of a portion of its brick and mortar retail locations

Golfsmith International Holdings’ debt load mounts

In its bankruptcy documents, the company claimed the decline of golf’s popularity throughout North America was to blame for its loss of revenues. This drop in the sport’s interest coincided with its failed attempt to expand operations in 2011 which involved the construction of larger stores with higher operating costs. 

Golf’s popularity never experienced a resurgence to its previous levels in the early 2000s. Part of this decline was attributed to the fall of Tiger Woods as the sport’s top star, which caused younger audiences to become less interested in the sport. In fact, according to National Golf Foundation data cited by Bloomberg, golf participation dropped by more than 1.6 million players from 2015 to 2011. As a result, the company accumulated both assets and debts up to $500 million. Part of Golfsmith’s debt load includes more than $100 million on a loan and over $95 million in second-lien notes owed in 2018.

The reorganization plan for Golfsmith International Holdings

Metro News Canada reported Golfsmith will attempt to sell a portion of its chain locations, subject to court approval. Specifically, the company’s two senior lenders, Fairfax Financial Holdings Ltd. and CI Investments Inc., have offered to buy Golfsmith’s Canadian Golf Town stores. However, if the company cannot reach this deal, it will shut down a portion of its stores, and liquidate a portion of its remaining assets. 

The Wall Street Journal reported Golfsmith’s U.S. business took the bigger hit from the drop in interest in the sport. Meanwhile, the Canadian stores have a larger share of the market, thus making them more valuable to Fairfax and CI.

The Golfsmith operation in the U.S. is currently seeking a $135 million loan from a venture capital firm to finance operations, The Journal found. If the court approves the loan, the company plans to close its lowest performing stores and reorganize its debt load. Golfsmith also plans to emerge from the bankruptcy process as a viable business model.

The significance of the Golfsmith International Holdings filing

Golf is losing popularity at record rates, which has caused a ripple effect throughout the sport’s retail sector. In fact, Bloomberg reported that Nike Inc. and Adidas AG have decided to halt sales of golf equipment and leave the sport altogether. Furthermore, following Sports Authority’s bankruptcy filing, that originally called for the close of underperforming store locations, golf’s dropping popularity resulted in a full asset liquidation sale.

Are you a creditor in a bankruptcy?  Have you been sued by a bankrupt?  If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.

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