Sports Authority Looks to be the Next Big Tenant Chapter 11 Bankruptcy Filing
Saturday, February 6, 2016

Sports Authority, Inc. (“Sports Authority”) appears to likely be the next big tenant Chapter 11 bankruptcy filing. Recent reports are indicating that the sporting and apparel chain is preparing to file for Chapter 11 bankruptcy protection, as debt payments are due in 10 days, according news reports from Bloomberg Business and other outlets. Of its 450 stores,Bloomberg reports that Sports Authority plans to close as many as 200 locations within a bankruptcy proceeding.

Sports Authority was once the biggest sporting-goods chain in the U.S, but over the past few years has had difficulty competing with Dick’s Sporting Goods Inc., Lululemon Athletica Inc., Gap Inc.’s Athleta, and Amazon.com Inc.

Landlord’s Questions

If you are a landlord, it’s a good idea to review your accounting and call any defaults that may exist. Furthermore and operationally, you may want your property manager to speak with the store manager to obtain important security code, HVAC, and utility information, if you don’t already have it on hand. If a store is rejected or abandoned in a bankruptcy proceeding you don’t want to be scrabbling for that information after the fact.

If Sports Authority does file for file bankruptcy protection, some vital questions are: (1) Will they remain a tenant?; (2) When will rent be paid?; (3) Are there pre-petition claims that are owed?; (4) Is there Debtor in default of pre petition non-monetary obligations?; and (5) What other damages are owed (both pre- and post-petition)?

Trade Creditor Questions

Trade creditors, including suppliers, should also be asking important questions such as: (1) Have you been paid on time and does a reclamation claim (right to take back goods shipped, unpaid within 45 days) exist?; (2) Can an administrative claim be asserted?; and (3) Should a proof of claim be filed, and if so, how?

It’s a good idea for commercial landlords and trade creditors to speak with bankruptcy counsel now to formulate and execute a plan in the event of the likely bankruptcy filing. 

 

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