Joel R. Glucksman
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201-896-7095 jglucksman@sh-law.comFirm Insights
Sports Authority May Be Filing for Chapter 11 Bankruptcy
Author: Joel R. Glucksman
Date: March 3, 2016
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Sports Authority may be filing for chapter 11 bankruptcy
Sports Authority Inc., one of the largest sporting goods retailers in the U.S., plans to file for Chapter 11 bankruptcy protection in March, ABC News 8 in Tulsa reports, citing people aware of the expected move. According to a CNBC report, there is serious doubt that the company can complete its upcoming interest payment.
Sports Authority falls into debt
In a Bloomberg report, Sports Authority’s rising competition from existing rivals in the retail space such as Dick’s Sporting Goods Inc., Lululemon Athletica Inc., Gap Inc.’s Athleta and Amazon.com Inc. for its financial difficulties. Formerly the largest sporting good retail chain in the U.S., Sports Authority’s revenues have declined to the point where it is now forced to close nearly half of its remaining store locations. In fact, the company is rumored to have $643 million in total liabilities, which includes $343 million in subordinated debt.
The company is said to be negotiating an agreement with creditors for an extension on its impending $20 million interest payment. This would mark the second time that it would miss a debt interest payment, as it recently did so on Jan. 15. Following a 30-day grace period, the company was still unable to make the payment, which caused its Moody’s credit rating to be downgraded shortly thereafter.
As a result, TPG Capital provided the company with a $70 million cash infusion as part of a $95 million asset-backed loan. This financing agreement enabled Sports Authority to maintain operation through last year’s holiday season.
Sports Authority’s reorganization plan
The company is currently negotiating a debt-for-equity swap with its bondholders. According to The Wall Street Journal, the deal will offer majority shares of the newly restructured company to its debt holders in exchange for the elimination of its outstanding debt total.
As part of its bankruptcy proposal, the company plans to wind down operations at approximately 200 of its 450 store locations. Bloomberg reported that this plan will be triggered if the company cannot fulfill its upcoming debt interest payment.
Sports Authority also confirmed recently that it has laid off over 100 personnel at its corporate offices. According to the Denver Business Journal, the company may conduct further layoffs in the near future. In a statement, Sports Authority officials confirmed that there will be more changes to the company’s balance sheet.
“Sports Authority and its advisors continue to work toward a balance sheet restructuring that will reduce the level of the company’s debt,” the company explained. “We remain very focused on implementing a comprehensive operational plan that will support this effort while improving our ability to engage with our customers in stores and online.”
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.
- Practices: Bankruptcy & Creditors' Rights, Corporate Transactions & Business, Bankruptcy Litigation
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
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