TSA Stores, Inc. (“Sports Authority” or the “Company”), an industry leader in providing a wide assortment of quality, brand-name sporting goods, announced that Sports Authority and several of its affiliates filed voluntary petitions to restructure under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the “Court”). In conjunction with the Chapter 11 filing, the Company expects to have access to up to $595 million in debtor-in-possession (DIP) financing. Subject to Court approval, the DIP financing, combined with the Company’s cash from operations, is expected to provide sufficient liquidity during the Chapter 11 process. Rothschild Inc. is acting as financial advisor, FTI Consulting is acting as restructuring advisor, and Gibson Dunn and Young Conaway Stargatt & Taylor are acting as the Company’s legal counsel in connection with the Chapter 11.
“We are taking this action so that we can continue to adapt our business to meet the changing dynamics in the retail industry,” said Michael E. Foss, Chief Executive Officer of Sports Authority. “We intend to use the Chapter 11 process to streamline and strengthen our business both operationally and financially so that we have the financial flexibility to continue to make necessary investments in our operations.”
All Sports Authority stores nationwide remain open and continue to operate on normal schedules. Customers also may continue to shop online just as they have in the past. The majority of Sports Authority stores are expected to continue to operate without change or interruption during the entire Chapter 11 process. As part of the restructuring, the Company has identified approximately 140 stores and two distribution centers, in Denver and Chicago, that it intends to close or sell in the coming months. This decision follows a comprehensive review of the Sports Authority store portfolio in light of the increasing amount of shopping that is occurring online. As a result of these changes in consumer buying patterns, Sports Authority determined that it needs fewer stores as part of its long-term business model. Therefore, the Company has filed a motion with the Court seeking approval to proceed with store closing sales at the identified stores, after which those stores are expected to be closed or sold. The store closing process is expected to take up to three months.
During the past several months, Sports Authority has been working with its outside financial advisors to conduct a strategic review of its business and evaluate options for strengthening the Company’s financial position. As part of this process, Sports Authority has pursued a dual track, engaging in discussions with its financial creditors regarding a comprehensive debt restructuring, as well as exploring a recapitalization of the business through a potential sale of some or all of its assets. The Company will continue to pursue these two tracks consistent with the Chapter 11 milestones established by the DIP financing.
“Given our strong brand recognition with a large and growing customer base, valuable business assets and loyal Team Members, we have received strong interest from third parties interested in investing in or buying some or all of Sports Authority,” said Foss. “We intend to continue evaluating all options to maximize the value of the organization and position us for sustainable success in our industry. As it has been from the beginning of the strategic business review process, our primary objective is doing what is in the best interests of our employees, customers, suppliers and creditors.”
As a routine matter, the Company has asked the Court for authorization to continue paying employees’ wages, salaries and benefits and to continue its various customer programs without any change. Court approval for those requests is expected within the next day or two. As a result, the Company’s salaried and hourly employees should continue to be paid on the normal schedule, and there are expected to be no changes to various employee benefit programs. In addition, customers should not experience any changes in their relationship with Sports Authority. This means the Company’s customer loyalty program is expected to continue without any changes, and the Company intends to honor warranties on goods purchased at one of its stores or through its eCommerce site. Customers also should be able to make returns and exchanges in accordance with Sports Authority’s return policy and use any Sports Authority gift card with an available balance to purchase merchandise in stores or online.
For more information about the Chapter 11 case, including access to Court documents, visit: www.kccllc.net/sportsauthority.