Sports Authority Tries to Avoid Chapter 11 Bankruptcy

by San Antonio Attorney

Authority is facing Chapter 11 bankruptcy after being unsuccessful in capitalizing on the current fitness trend that competitors benefit from.

The U.S. sporting goods chain is trying to avoid a bankruptcy filing by persuading creditors to decrease its outstanding debt, according to reports.

Sports Authority, which has 450 branches, failed to make the $343 million interest payment due on Jan. 15.  It has a subordinated loan payable until 2018 and has been in talks with bondholders regarding debt reduction in exchange for other securities, according to the people who have knowledge about the matter.

The retailer owes an estimated $643 million and may file for bankruptcy protection if a deal is not closed with the bondholders.  If Sports Authority fails to make the payment after a 30-day grace period, it will default on the debt.

In August 2011, Sports Authority signed a naming-rights agreement with the Metropolitan Football Stadium District in Denver that renamed the Invesco Field at Mile High of Broncos to Sports Authority Field at Mile High.

Sports Authority assumed Invesco’s obligations to the Broncos and the stadium district to pay a total of $120 million within 20 years.

According to the district, the next payment is $3.6 million and it is scheduled on Aug. 1, 2016.

Earlier in January, Sport Authority released an official statement saying that the company has enough liquidity to continue its business operations.

The company also said in a separate announcement that it was allowed by its lenders not to pay for the $20 million interest on its subordinated notes.

According to experts, Sports Authority may have avoided getting into financial troubles if it had expanded online and built more locations.  Dick’s, the largest sporting-goods retailer in the U.S. with $6.8 billion in latest revenue, used to be its main competitor 9 years ago.

 

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