Sports Authority committee blasts DIP loan and asset sale timeline

By Caroline Salls

Pittsburgh, April 1 – Sports Authority Holdings, Inc.’s official committee of unsecured creditors raised objections Thursday to the company’s debtor-in-possession financing and asset sale approval motions, according to a filing with the U.S. Bankruptcy Court for the District of Delaware.

“The proposed DIP financing package is a lopsided deal that provides a litany of benefits and protections to the ABL, FILO and term loan lenders while shortchanging the estate, relegating administrative creditors who are left out of the budget to non-payment, and impairing the debtors’ prospects for reorganization or a going concern sale of their assets that maximizes the recoveries of all creditors,” the committee said.

The committee said Sports Authority has failed to establish that it even needs DIP financing, and it is not obtaining any new money loans.

The creditor group said the company’s projected cash flows will be enough for it to operate on cash collateral use.

“The DIP financing appears to have less to do with providing the debtors with financing than with benefitting and protecting the prepetition secured creditors to the detriment of the debtors, their estates and unsecured creditors,” the committee said.

In addition, the committee said the “essentially nonexistent yet expensive financing” and the use of cash collateral are conditioned on Sports Authority’s strict compliance with sale milestones that “dictate an unreasonably expedited sale of substantially all of the debtors’ assets notwithstanding the fact that the debtors did not conduct a robust marketing process prepetition and filed the bid procedures motion without a stalking horse bidder in place.”

“If the DIP motion is granted, the debtors will be forced to conduct a fast-track fire sale of their assets, in that from a standing start they must generate bids, conduct an auction and close on a sale within the next five weeks,” the committee said in its objection.

Sports Authority, an Englewood, Colo.-based sporting goods retailer, filed for bankruptcy on March 2. The Chapter 11 case number is 16-10527.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.