Creditors Group Seeks Trustee To Manage Sports Authority Bankruptcy

While Sports Authority has continued to close its stores and sell off its remaining assets in the wake of its March 2016 bankruptcy filing, the retailer’s unsecured creditors are seeking ways to ensure they will be paid at least some of what they are owed.

The creditors committee recommended a Delaware bankruptcy court to convert the case to a Chapter 7 liquidation, in which a trustee would be appointed to oversee the retailers’ bankruptcy. The committee argued that:

  • Remaining in Chapter 11 to spend money preparing the required bankruptcy exit plan would make creditors worse off;


  • Sports Authority is unable to pay its $50 million pool of administrative claims to run the bankruptcy case;

  • The retailer unfairly prioritizes some administrative costs over others, revealing that while $23 million has been set aside for lawyers and advisers and $2.85 million for bonuses for executives, landlords and suppliers are still waiting for their administrative payments.

The creditors requested that the court hear their argument for converting the case on Aug. 2, the same day the court will hear arguments for approving a deal between the retailer and its lenders.

Sports Authority has attempted to speed up its liquidation by accelerating store closures, but the case has continued as suppliers and lenders have continued to fight with the retailer over use of cash, even as the chain continues operating going-out-of-business sales.

Tensions between Sports Authority and its suppliers have been high since the retailer’s bankruptcy filing. Consignment vendors threatened to pull $85 million in winter gear from the retailer’s shelves. In response, Sports Authority filed more than 160 lawsuits against these suppliers. The retailer and a group of the vendors have since reached a settlement.

The beleaguered sporting goods retailer even battled with its own landlords, who had said in March that the retailer didn’t have a plan in place to pay approximately $20 million in unsecured financing for the leased store space.



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