On March 2, 2016, Sports Authority Holdings, Inc. and six affiliated entities filed Chapter 11 bankruptcy cases in the United States Bankruptcy Court for the District of Delaware.  According to papers filed in the case, Sports Authority plans to close up to 200 of its 468 stores and two of its distribution centers, in order to exit underperforming or unprofitable store locations, and increase liquidity in the short term.  On March 3, 2016, United States Bankruptcy Judge Mary F. Walrath gave Sports Authority interim approval to start liquidating approximately 140 locations, and approved a deal with a group of liquidators consisting of Gordon Brothers Retail Partners LLC, Tiger Capital Group LLC and TSA Stores Inc. to conduct going out of business sales at dozens of stores across the country.

In order to accomplish its objectives, Sports Authority will need to reject leases, and will likely seek approval of other actions that may not be in the best interests of landlords.  Sports Authority has already requested that the Bankruptcy Court (1) prevent landlords from enforcing provisions in leases which prohibit going out of business sales and (2) allow Sports Authority to abandon any assets that cannot be sold at the leased locations without liability to landlords.

In addition to the going out of business sales relating to its underperforming stores, Sports Authority intends to seek a going-concern buyer for its remaining assets, and may conduct a going-concern sale transaction on an expedited basis.  If Sports Authority moves forward with the sale option, the debtor-in-possession financing terms filed with the Bankruptcy Court require a qualified bid deadline of April 21, 2016 and a sale closing date of April 28, 2016.  Given the expedited nature of this case, and the complexity of the Chapter 11 process, it is important that landlords understand their rights and remedies, and how the bankruptcy process may negatively impact those rights.  Please contact a member of our Creditors’ Rights and Bankruptcy Group if you have any questions.

Linda V. Donhauser at ldonhauser@milesstockbridge.com or 410-385-3684
Joel L. Perrell Jr. at jperrell@milesstockbridge.com or 410-385-3762
Richard L. Costella at rcostella@milesstockbridge.com or 410-385-3440
Kenneth M. Misken at kmisken@milesstockbridge.com or 703-610-8693
Patricia B. Jefferson at pjefferson@milesstockbridge.com or 410-385-3406
Kristen M. Siracusa at ksiracusa@milesstockbridge.com or 410-385-3726

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Responsible Lawyer:

Linda V. Donhauser
(410) 385-3684
ldonhauser@milesstockbridge.com
100 Light Street
Baltimore, MD 21202