Sports Authority Skips Interest Payment Amid Creditor Talksby and
Sports Authority Inc. skipped a $20 million interest payment on its bonds due on Friday as the retailer continued talks with creditors about how to restructure debt.
The move follows several months of deliberations with Sports Authority’s financial adviser, Rothschild & Co., the company said in an e-mailed statement. It also has held discussions with senior lenders about ways to strengthen the retailer’s balance sheet, Sports Authority said.
“Although Sports Authority currently has sufficient liquidity to conduct its business operations and to make the current interest payment on the subordinated mezzanine debt, after consultation with our senior lenders we elected not to make the interest payment while we continue these discussions,” the company said.
Sports Authority, based in Englewood, Colorado, is owned by private equity firm Leonard Green & Partners LP. The chain, which has more than 450 stores, has struggled to keep up with competitors such as Dick’s Sporting Goods Inc. over the past decade.
The payment is the interest on its privately placed $343 million subordinated notes maturing in 2018. Without reaching an agreement with the bondholders for a forbearance, the company will be forced to file for bankruptcy as skipping a coupon payment is considered a default.
The retailer has at least $643 million in debt, including a newly extended $343 million in subordinated notes maturing in 2018, according to data compiled by Bloomberg and Moody’s Investors Service Inc. There’s $650 million in an asset-backed revolving loan that provides money for day-to-day needs. It’s unclear how much is drawn under that line. It faces a deadline to refinance $300 million of its term loan before it becomes current in May.
Reuters previously reported on the missed payment.