Sports Authority Creditors Seek to Convert Bankruptcy Case to Chapter 7

Features Dow Jones Newswires

Sports Authority Holdings Inc.'s vendors and landlords are looking to pull the plug on the retailer's bankruptcy case.

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The retailer's unsecured creditors filed court papers Friday calling for the lights to be shut off permanently, saying Sports Authority faces mounting administrative claims on which it will never be able to get a grip.

"The debtors are hopelessly administratively insolvent and will never, ever be able to propose a confirmable plan," the unsecured creditors said in court papers.

The creditors are calling for the bankruptcy case to be converted into a chapter 7 proceeding, in which a trustee would be appointed to oversee the wind-down of the retail chain. Court papers show Sports Authority holds at least $50 million in unpaid administrative claims, as well as unpaid trade claims. In addition, court papers show there is an alleged $71 million claim from term loan lenders.

Other than the claims, there is little left to Sports Authority. The retailer sold its assets to a trio of liquidators, which have been running going-out-of-business sales at its more than 450 locations since late May.

At the end of June, Sports Authority's intellectual property, which includes its brand name, was sold to competitor Dick's Sporting Goods Inc. The retailer's real estate was sold during the same auction, with Dick's buying more than 30 locations.

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Still remaining to be sold is Sports Authority's contract that holds the naming rights to the NFL's Denver Broncos' Mile High Stadium. Hilco Streambank is in charge of the process, and offers are due by Monday.

Earlier this week, The Wall Street Journal reported Sports Authority accelerated its store closings, and alerted multiple store employees and managers to wipe computers of information and lock the doors by the end of the month.

The unsecured creditors' say in court papers that Sports Authority's chapter 11 cases have been "quite simply, failures" and have been "mired in contentious litigation from day one."

A spokeswoman for Sports Authority didn't immediately respond to comment.

Sports Authority's prepetition lenders have battled with unsecured creditors during the bankruptcy over financing offered by the lenders which came with hefty terms.

When Sports Authority filed for bankruptcy protection in March, it hoped to find buyer that would save the chain from liquidation. However, following mounting litigation with vendors, landlords, and creditors, the retailer threw in the towel.

Almost immediately after the retailer's chapter 11 filing, tensions arose between Sports Authority and consignment vendors, who threatened to pull $85 million in winter gear from the retailer's shelves. In response, Sports Authority filed more than 160 lawsuits against these suppliers. The retailer and a group of the vendors have since reached a settlement.

In addition, Sports Authority also battled with landlords, who had said the retailer deliberately designed the chapter 11 filing to avoid paying rent, even while running liquidation sales or continuing operations at its other stores.

Peg Brickley contributed to this article.

Write to Lillian Rizzo at Lillian.Rizzo@wsj.com