Dick’s Sporting Goods and Modell’s Sporting Goods are seen as possible buyers for all or part of Sports Authority after the chain filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court in Delaware this morning.
The Englewood, Colo.-based sporting goods chain has identified 140 stores and two distribution centers that it plans to close or sell as part of its restructuring plans. Sports Authority currently operates more than 450 stores in 40 states and Puerto Rico and the inventory is processed through five regional distribution centers.
The chain said that it had strong interest from buyers for all or part of its assets. Analysts have speculated that Dick’s and Modell’s could try to snap up some or all of Sports Authority’s operations. Sports Authority is also considering comprehensive debt restructuring with its creditors. It has at least $643 million in debt.
Wellington Management and Blackstone Group’s GSO Capital Partners are holders of Sports Authority’s $300 million debt maturing November 2017. Also, Fort Worth, Texas-based lender TPG Capital Management provided Sports Authority with $70 million of a $95 million loan to get through the holiday season.
The bankruptcy is not a surprise since the chain missed an interest payment in January that started a 30-day grace period to work out a compromise with creditors. Not long after, Sports Authority was downgraded by the ratings agency Moody’s. The problems at Sports Authority seemed to benefit its competitor Dick’s Sporting Goods, which saw its stock price increase as analysts began to speculate that Dick’s would gain more market share.
The company said in the filing that it has access to $595 million in debtor in possession financing to help see it through this reorganization. Sports Authority never quite recovered from a $1.3 billion buyout in 2006 that took the company private with Leonard Green & Partners out of Los Angeles.
Sports Authority seems to have missed a golden opportunity over the past few years as the ath-leisure trend has taken hold. The movement has helped brands like Lululemon and Under Armour become juggernauts in athletic apparel. It is also something that Dick’s has seized on with well-presented store layouts and strong partnerships with Under Armour and Nike.