BANKRUPTCY PLAYS

[sludgehound]

Sports Authority Holdings $595 million bankruptcy loan has run into trouble with a key creditor group, who pointed out "numerous red flags."

Sports Authority Holdings Inc.'s $595 million bankruptcy loan has run into trouble with a key creditor group, who pointed out "numerous red flags."
Unsecured creditors are seeking more information regarding the bankruptcy financing, "including communications regarding the proposed financing, how it was negotiated and why the debtors believe that it is fair and appropriate despite numerous red flags," according to court papers filed Tuesday in the U.S. Bankruptcy Court in Wilmington, Del.
In light of their concerns, the creditors have asked Judge Mary Walrath to push back a March 29 hearing on the financing by a week. They also want more time to review the company's plan to sell itself.
The unsecured creditors' committee, which was formed less than two weeks ago, raised concerns about the speedy sale timeline and various chapter 11 deadlines that are a condition of the bankruptcy financing. Those deadlines ultimately call for Sports Authority to be sold by the end of April, the company's attorney said in a previous hearing. If the company isn't sold by then, Sports Authority will have it liquidate its remaining open stores.
The creditors also argue that since Sports Authority already received court approval to tap a portion of its bankruptcy loan, the company has "ample liquidity through March 29, 2016 and beyond."
Some of Sports Authority's landlords, including DDR Corp. (DDR) and a General Growth Properties Inc. (GGP) subsidiary, also have issues with the bankruptcy loan, which they say fails to provide payment of rent they are owed following Sports Authority's March 2 bankruptcy filing as well as rent owed before the filing.
Shortly after its chapter 11 filing, Sports Authority won approval to use up to $275 million of the bankruptcy loan and to begin liquidating some of its stores. However, the loan did require some modifications after facing some preliminary concerns from landlords as well as a federal bankruptcy watchdog.
The big-box sports retailer plans to liquidate 140 of its roughly 450 stores. It also plans to shut down two distribution facilities in Denver and Chicago , according to court filings.
Sports Authority , backed by private-equity firm Leonard Green & Partners LP , which acquired Sports Authority in a $1.3 billion leveraged buyout in 2006. By the time it filed for bankruptcy, it had more than $1 billion in debt on its books.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)
Write to Lillian Rizzo at [e-mail]

(END) Dow Jones Newswires
03-23-16 1422ET
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