Sports Authority creditors move to convert bankruptcy to Chapter 7

Dive Brief:

Sports Authority’s unsecured creditors, including vendors and landlords, want the retailer's Chapter 11 bankruptcy case converted to Chapter 7, which would expedite store closings and have a trustee appointed to oversee the end.
According to court filings from Friday, unsecured creditors argue that Sports Authority is "administratively insolvent,” can’t afford the cost of its bankruptcy, and is prioritizing its own administrative costs over its debts.
Sports Authority filed for Chapter 11 in March, and has liquidated most of its assets, including inventory, store leases and intellectual property. Dick's Sporting Goods acquired its name and other intellectual property at a June auction, and bids for its naming rights to the Denver Broncos’ Mile High Stadium in Denver, CO, are due Monday.

Dive Insight:

Sports Authority’s lenders and landlords have clearly lost patience. Lenders that say the bankrupt chain owes them $240 million, while suppliers that have shipped an estimated $50 million of goods are clamoring to be paid. In the filings Friday, the creditors said $23 million is being reserved for lawyers and advisers and $2.85 million for executive bonuses, while landlords and suppliers wait for their payments, according to Reuters.

The proceedings have been marked with various legal tussles, including more than 160 lawsuits the retailer filed in March. At issue then was some $85 million worth of winter gear and other goods being sold at Sports Authority stores—items suppliers wanted returned because they feared not getting paid.

These scuffles have stymied the chain’s efforts to sell more stores and it’s been forced to liquidate instead.

Last week the chain moved to shut stores a month early, potentially saving many much-needed dollars in rent. But as the Journal points out, it's also putting the 14,000 employees it once supported in a tough spot, depriving them of a month of wages, job stability, and health insurance.

As its operations wind down, the retailer is a slim shadow of its former self. Sports Authority was once the largest sporting goods chain in the U.S., and in 2006, when the retailer was acquired by private equity firm Leonard Green & Partners for $1.3 billion, its future was bright. But mounting debt, weak e-commerce returns and increased competition, including from general merchandise brands like Wal-Mart, Target, and, of course, Amazon, and from apparel retailers like Gap, took it down.