- Inventory to be liquidated at going-out-of-business sales
- Company still evaluating bids to take over some store leases
Sports Authority Inc.’s name, and the right to keep it on the home stadium of the Super Bowl champion Denver Broncos, went unsold at a bankruptcy auction Monday, according to three people familiar with the bidding results.
Instead, three liquidators bought the rights to run going-out-of-business sales at the insolvent chain’s stores, which will raise enough money to pay two top lenders, according to two of the people, who asked for anonymity because the auction results aren’t public yet. It’s unlikely the company will raise enough money to repay the approximately $646 million it owes lower-ranking creditors.
Tiger Capital Group, Gordon Brothers Group and Hilco Trading Co. won the auction with a joint bid that will guarantee an upfront cash payment for the inventory. Such so-called liquidation bids are common for bankrupt retailers and typically include a clause that splits the liquidators’ take with the company.
The winning bid is enough to pay off an asset-backed loan that was as much as $345 million when Sports Authority filed bankruptcy in March but has been shrinking since. There’s also enough to cover a separate, $95 million loan, two people said.
Company officials are still evaluating a small number of offers by bidders who want to take over leases for some of Sports Authority’s 450 locations, one of the people said. When it first filed for bankruptcy, the company had planned to shut down and sell the leases on at least 140 stores. At the auction on Monday, no acceptable offers came in that would keep chain open, according to the people familiar with the outcome.
The company’s name and all of its other intellectual property may be taken over by lenders who won’t be cashed out by the inventory liquidation. Those lenders, owed $277 million, include Blackstone Group’s GSO Capital Partners, Wellington Management and Columbia Management Investment Advisers, according to court records filed in March.
Those lenders claim to have collateral rights over the intellectual property that would allow them to take control of the company name, including naming rights to Sports Authority Field in Denver, near the company’s home office.
As a deadline to submit bids to save the chain approached last week, Modell’s Sporting Goods Inc. backed away from a potential deal that would have kept some of the stores operating under their current name, people with knowledge of the matter said at the time. New York-based Modell’s, the only potential buyer to express interest in keeping the Sports Authority brand going, walked away because the two sides couldn’t agree on a price, the people said.
The term-loan lenders who claim the naming rights had pushed the company to liquidate its stores, anticipating that lenders would receive a better recovery than from what Modell’s was offering.
As recently as May 3, company attorney Robert Klyman of Gibson, Dunn & Crutcher LLP told U.S. Bankruptcy Judge Mary Walrath in Delaware that “liquidation is not in our vocabulary.”
Klyman didn’t return a call seeking comment on the auction results. A hearing to approve the auction results could be held as early as May 23.
The case is In re Sports Authority Holdings Inc., 16-10527, U.S. Bankruptcy Court, District of Delaware (Wilmington).