Sports Authority, term loan agent settle adequate protection dispute

By Caroline Salls

Pittsburgh, July 13 – Sports Authority Holdings, Inc. requested court approval of a settlement with term loan agent Wilmington Savings Fund Society, FSB that resolves a more than $240 million adequate protection claim, according to a motion filed Tuesday with the U.S. Bankruptcy Court for the District of Delaware.

Sports Authority said substantially all of the cash necessary to fund the wind down of its jointly administrated cases is subject to the liens of the pre-bankruptcy term loan agent. In addition, the company said its unencumbered assets are pledged to support the adequate protection claim asserted by the term loan agent under the debtor-in-possession financing order.

The company said it disputed the amount of the adequate protection claim and conducted an independent analysis that revealed that the claim “should be substantially smaller.”

According to the motion, the proposed settlement ensures that Sports Authority will be able to fund the wind down of its Chapter 11 cases and resolves “a host of complex issues that will otherwise pose substantial roadblocks to the progress and resolution of these Chapter 11 cases.”

Under the settlement, the agent will fund with unencumbered cash payments to unsecured administrative creditors. Specifically, the term loan agent will fund administrative costs and expenses to be funded in accordance with a wind-down budget, will provide cash to pay post-bankruptcy trade creditors in full and will fund 85% of landlord stub rent claims, capped at $21 million.

The agent will also consent to the company’s use of cash collateral in accordance with the wind-down budget.

The company agreed to waive its right to assert a surcharge claim against pre-bankruptcy lenders agents.

To account for the diminution in the value of its interests in the pre-bankruptcy collateral, the term loan agent will receive a $71 million allowed adequate protection claim secured by DIP financing collateral.

A hearing is scheduled for Aug. 2.

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

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