Bankruptcy Judge Allows Sports Authority to Start Liquidation Sales

by San Antonio Attorney

Judge Mary Walrath in the United States Bankruptcy Court of Delaware has allowed retailer Sports Authority Holdings, owner of Sports Authority, to commence liquidation of its stores.  The company has been allowed to utilize up to $275 million of its bankruptcy loan.

The sporting goods store has obtained $595 million worth of bankruptcy loans.

The loan was provided was the existing lenders spearheaded by Bank of America and Wells Fargo.  After a modification of provisions, addressing issues such as lack of notice to landlords and pending approval to man going out-of-business sales.  The bankruptcy loan was finally permitted.

The financing deal stipulates that the company needs to have a buyer by the end of April.

The company sought bankruptcy protection last Wednesday with a contingency plan to liquidate 140 out of 450 stores.  It also has plans of closing down two main distribution facilities located in Denver and Chicago, according to the bankruptcy filing.

Sports Authority is given until April to sort out its issue of finding the buyer to maintain operations in its remaining stores, according to the court filing.

The company, riddled with financial problems and backed by Los Angeles based private-equity firm Leonard Green Partners & Co, has incurred more than $1 billion in debt.

Leonard Green acquired Sports Authority through a hedge fund amounting to $1.3 billion in a leveraged buyout last 2006.

Sports Authority has a long history of acquisitions that did not coincide with store formats.  Other problems include a frequent turnover in executive decisions, dated information systems, expensive leases and a final decision to halt the selling of hunting and fishing goods in the newly opened stores.

Modell’s Sporting Goods and Middle Ranking Lenders such as Blackstone Group are the possible bidders for the upcoming liquidation auction for Sports Authority.

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