What will become of Sports Authority

On behalf of Macdonald Fernandez LLP posted in business and commercial bankruptcy on Friday, March 11, 2016.

March is commonly a good month for sporting goods retailers. After all, a majority of the country is preparing for youth baseball leagues to begin. Also, many golf courses across the nation are opening (or are weeks away from doing so). And with March Madness ready to begin, basketball apparel usually sells well.

While March may bode well for some retailers, Sports Authority has filed for Chapter 11 bankruptcy protection. The Colorado based retailer recently failed to make a $20 million interest payment on a $343 million loan that is scheduled to be due in 2018. In order to further reduce costs and expedite a restructuring plan, it plans to close more than 140 stores across the United States.

Retailers do not commonly fare will in Chapter 11 bankruptcies. The market for liquidation sales has changed over the years, with more companies willing to facilitate "going out of business" sales and more vendors wanting to protect their investments. Also, today's administrative rules require corporate debtors to make quicker decisions about their futures, which often leads to them deciding to terminate their operations.

It remains to be seen what will become of Sports Authority, and whether it emerges from bankruptcy. The sporting goods market is quite splintered according to Bloomberg.news, and Sports Authority's loss may be another retailer's gain. In the meantime, the story exemplifies the need for experienced legal counsel in the midst of a Chapter 11 bankruptcy. Not only are there legal hurdles that must be cleared, but there are practical customer relations aspects that cannot be ignored.