A bankruptcy filing looks to be days away for Sports Authority
March 1, 2016 03:42 PM
(Bloomberg)—Sports Authority Inc., plans to file for bankruptcy within the next few days, assuming it can finalize terms for a loan to keep it operating during court proceedings, according to people with knowledge of the matter.
The retailer is sorting out details on the loan, known as debtor-in-possession financing, said the people, who asked not to be identified because the talks are private. Lenders such as Wellington Management and Blackstone Group’s credit unit GSO Capital Partners are considering providing the financing, two of the people said. They are two of the holders of Sports Authority’s $300 million term debt maturing November 2017.
Sports Authority, No. 277 in the Internet Retailer 2015 Top 500 Guide, plans to close about 150 stores as part of its bankruptcy plan, according to one of the people. It’s also in discussions about potentially selling stores to Dick’s Sporting Goods Inc. (No. 70) and Modell’s Sporting Goods, people with knowledge of the talks said this week.
The bankruptcy filing would follow a decadelong descent for Sports Authority, which was near the top of the sporting-goods industry when it was bought by private equity firm Leonard Green & Partners LP and other investors for $1.3 billion in 2006. Since then, it’s struggled to keep pace with Dick’s and newer rivals such as Lululemon Athletica Inc.
The company has been holding talks with lenders such as TPG on a deal to reorganize in Chapter 11 bankruptcy proceedings, people familiar with the situation said last month. To help the chain operate through the holiday season, TPG provided Sports Authority with $70 million of a $95 million asset-backed loan late last year, one person said.
A spokesman for Sports Authority declined to comment, while representatives for Dick’s and Modell’s didn’t respond to requests for comment. Representatives for Wellington Management and Blackstone also declined to comment.
The Englewood, Colo.-based retailer has at least $643 million in debt. The company missed a Jan. 15 interest payment and failed to make the payment during a 30-day grace period, putting it in at least partial default. The subordinated bondholders are being advised by Houlihan Lokey Inc. The company’s advisers are Rothschild & Co., FTI Consulting Inc. and Gibson Dunn & Crutcher LLP.
Though Dick’s would bolster its market leadership if it acquired more stores, such a deal would face low antitrust risk, said Jennifer Rie, an analyst at Bloomberg Intelligence. Consumers would still have plenty of other choices for sports equipment even if Dick’s bulks up, she said.
“The agencies have recognized that retail marketplace has changed due to competition from Amazon and discounters like Wal-Mart,” she said.