Sports Authority Inc. is preparing to file for bankruptcy as it faces a debt payment due in 10 days, according to people with knowledge of the matter.
The retailer, once the biggest sporting-goods chain in the U.S., is in talks with lenders including TPG Capital Management LP on a deal to reorganize in Chapter 11 bankruptcy proceedings, said the people, who asked not to be named because the negotiations are private. It’s also mapping out a plan to close as many as 200 of its more than 450 stores under the bankruptcy plan, the people said.
Sports Authority is negotiating with creditors as the clock ticks on a $20 million interest payment that it skipped last month on its $343 million of subordinated debt. It’s been talking to holders of those bonds about accepting a loss in exchange for other securities, said the people. The company would be able to stave off a bankruptcy filing if it reaches a deal with the bondholders.
Representatives for Sports Authority and TPG declined to comment.
The retailer, which has at least $643 million in debt, has struggled to keep up with competition from old rivals such as Dick’s Sporting Goods Inc. as well as newer entrants like Lululemon Athletica Inc., Gap Inc.’s Athleta and even Amazon.com Inc. Fort Worth, Texas-based TPG provided Sports Authority with $70 million of a $95 million asset-backed loan late last year that enabled it to operate through the holiday season, a person said.
The subordinated bondholders are being advised by Houlihan Lokey Inc. The company’s advisers are Rothschild & Co., FTI Consulting Inc. and Gibson Dunn & Crutcher LLP.
Sports Authority was bought by a group led by private equity firm Leonard Green & Partners LP for $1.3 billion in 2006. A spokeswoman for Leonard Green didn’t respond to telephone and e-mail messages seeking comment.