Sports Authority is still pursuing a "robust" sale process and is not yet ready to settle for liquidation, attorneys for the sporting goods retailer told a federal bankruptcy judge on Tuesday.
Judge Mary Walrath could have forced the retail giant into Chapter 7 liquidation. Last week, she struck down $595 million in bankruptcy financing that did not account for rent and administrative fees, but Sports Authority and its lenders ironed out a debtor-in-possession financing agreement that accounted for those requests.
With the funding set, Sports Authority now can pursue discussions with several parties that expressed interest in buying all or most of the Englewood-based company's assets, attorney Robert Klyman said during the hearing Tuesday in the U.S. Bankruptcy Court in Wilmington, Del.
"The liquidation word is not in our vocabulary," Klyman said.
The court had set an April 28 deadline for an offer by a "stalking horse" — a potential buyer that would make a baseline tender offer in advance of an auction — but none came forth, Klyman said.
Still, he said, "material parties" are conducting due diligence in pursuit of a possible acquisition of assets.
Last week, Sports Authority's attorneys said the company would not emerge under a reorganization plan, but rather would pursue sales of its assets auctioned to the highest bidder.
"Based on that financing agreement announcement, it appears that the debtors will be staying in control of their cases and handling their sale process through Chapter 11," Teresa Lii, distressed debt legal analyst for Reorg Research, a firm that tracks bankruptcy cases, said in an e-mailed statement.
Sports Authority received one qualified bid for the leases of four stores, located in Ventura, Calif.; East Brunswick, N.J.; Manalapan Township, N.J.; and Brooklyn, N.Y., according to a court filing made Tuesday. The bidder was not disclosed.
The lease of the Shenandoah, Texas, store will be the sole property up for auction on May 16.
The leases of more than 100 other stores — including the Sportscastle at 1000 Broadway in Denver and the Greenwood Village store at 9000 E. Peakview Blvd. — will be subject to competitive bidding in the main auction scheduled for May 24.
Likely participants in the asset sales and real estate auctions include sporting goods retailers Dick's Sporting Goods, Modell's and Academy Sports + Outdoors, analysts have said.
The CEO of rival Dick's Sporting Goods said the company would be "very aggressive" in trying to siphon business from the wounded Sports Authority. The company last month laid out a plan to increase marketing spending and possibly to target leases that were marketed for sale.
In addition to leases and intellectual property, the remainder of Sports Authority's naming-rights contract with the Denver Broncos' stadium in Denver also could be up for grabs.
Sports Authority assumed the $120 million Mile High Stadium naming-rights contract vacated by Invesco Ltd. in 2011, when there were 10 years left on the 20-year deal. The agreement include graduated annual payments split 50-50 between Denver's Metropolitan Football Stadium District and the Denver Broncos.
The district and the Broncos have remained on the sidelines through the Chapter 11 process, issuing statements expressing their commitments to their respective partnerships and agreements with Sports Authority.
However, district officials said they would review the agreement with Sports Authority if the contract was broken. If a $3.6 million payment is not made 30 days after its Aug. 1 due date, the district could terminate the contract, according to the public agreement.
The Broncos have not disclosed the team's naming-rights contract, which is said to be similar in nature to the stadium district's deal and goes through the 2020 football season.
However, the team's contract — made public in a recent court filing — also includes terms for Sports Authority's long-standing sponsorship deal. Sports Authority owes the Broncos $36 million through 2035.
The naming-rights portion of that Broncos contract expires in 2020, according to court filings.
Sports Authority, saddled with debt and an inefficient operations base, filed to reorganize under Chapter 11 bankruptcy protection on March 2.
In bankruptcy, the company started down a "dual-path" process: Either lop off a chunk of the $1.1 billion debt, slim down and emerge a leaner business; or sell the business as a whole or in parts.
The initial thinning out included cutting 100 jobs, mostly corporate roles; eliminating the team sports division; shuttering more than 140 of 463 stores; and closing two of five warehouses.The moves were expected to cost 3,400 out of 15,000 jobs.
However, vendors were none too pleased about the store-closing sales that got under way in March. Many sued Sports Authority seeking reimbursement for the consigned goods sold in liquidation.
Landlords also were irked that the filing came a day after March rents were due, resulting in some savings to the company but a $27 million loss to property owners, the Wall Street Journal reported.
Sports Authority's deterioration marks the end of a nearly century-old sporting goods empire in Denver.
In 2003, Gart Sports merged with Florida-based Sports Authority in a $500 million deal. Three years later, the company agreed to be acquired by shareholder Leonard Green & Partners in a $1.3 billion leveraged buyout that took the company private.
Alicia Wallace: 303-954-1939, email@example.com or @aliciawallace