Lenders to The Sports Authority Inc. have hired advisers to protect their investments as the private equity-backed retailer prepares to restructure its debt, according to three people with knowledge of the matter.
A group of senior lenders who hold some of the company’s $300 million term loan retained investment bank PJT Partners Inc. and law firm Brown Rudnick LLP as the company tries to get its $643 million of debt under control, said the people, who asked not to be identified because the appointments haven’t been made public.
Holders of Sports Authority’s junior-ranked debt are scheduled to meet with financial advisers Wednesday to hear proposals on how they’d guide creditors through restructuring negotiations, the people said.
Sports Authority, which is controlled by Leonard Green & Partners LP and has 467 stores, hired financial adviser Rothschild & Co. in an effort to help manage its debt, people with knowledge of that appointment said last month. The sporting goods chain is dealing with shrinking profits amid intense competition, according to a July 1 report from Moody’s Investors Service.
Kellie Kerwin, a spokeswoman for Englewood, Colorado-based Sports Authority at ICR Inc., didn’t immediately provide a comment. Erika Spitzer, a spokeswoman for Leonard Green, Julie Oakes, a spokeswoman for PJT Partners at Joele Frank, and Matthew Weaver, a spokesman at Brown Rudnick, declined to comment.
Sports Authority faces an “intense competitive environment” that Standard & Poor’s said in a May 29 report was unlikely to change in the short term. The retailer is expected to have difficulty retaining or regaining the market share it’s lost over the last few years, the ratings firm said.
The company had about $29 million in cash earlier this year, according to the S&P report. Free cash flow generated from its operations is expected to “hover in negative territory” this year, S&P said.
Sports Authority has fewer than six months to address the $300 million first-lien secured term loan due May 2017 before it becomes a current obligation. Companies typically have a harder time refinancing current debt.
The junior-ranked creditors already helped Sports Authority remove its senior-ranked loan from being marked current. The investors of the $343 million of subordinated notes agreed to extend the maturity of the debt by about two years to February 2018, according to the Moody’s report. The obligations had been scheduled to mature in May 2016.
Moody’s said in February that the senior loans were considered current then because of when the subordinated bond was set to mature.
Sports Authority’s revenues were nearly $2.7 billion in the year ended May 2, according to the July Moody’s report.