Sports Authority, the privately-held sporting goods retailer, filed for Chapter 11 Bankruptcy protection as it continues to struggle amid the increasing competition online.
Leonard Green & Partners LP owns Sports Authority. The private equity firm acquired the sporting goods retailer for $1.3 billion in 2006.
The sporting goods retailer expects to have access to as much as $595 million in debtor-in-possession (DIP) in conjunction with the Chapter 11 filing, subject to court approval. The company said the DIP financing combined with its cash from operations should provide enough liquidity during the Chapter 11 process.
Sports Authority aims to strengthen its business
In a statement, Michael E. Foss, CEO of Sports Authority said, “We are taking this action so that we can continue to adapt our business to meet the changing dynamics in the retail industry.” According to Foss, they intend to use the Chapter 11 process to streamline and strengthen the company financially and operationally. They want Sports Authority to have the financial flexibility to continue to make investments in its operations.
Sports Authority is seeking the approval of the U.S. Bankruptcy Court for the District of Delaware in Wilmington to hire liquidators and plans to start closing up to 200 underperforming stores out of its 463 locations and two distribution centers, according to court documents.
The company already identified around 140 stores and two distributions centers to close or sell in Denver and Chicago over the coming months.
“This decision follows a comprehensive review of the Sports Authority store portfolio in light of the increasing amount of shopping that is occurring online,” according to the company.
Sports Authority received strong interest from third parties
According to Foss, some third parties expressed strong interest to invest or buy some or all of Sports Authority because it has a strong brand recognition and large and growing customer base.
“We intend to continue evaluating all options to maximize the value of the organization and position us for sustainable success in our industry. As it has been from the beginning of the strategic business review process, our primary objective is doing what is in the best interests of our employees, customers, suppliers and creditors,” he said.
Rothschild and FTI Consulting are acting as its financial advisor and restructuring advisor, respectively while Gibson Dunn and Young Conaway Stargatt & Taylor serves as its legal counsel in the Chapter 11 process.