Golfsmith, Golf Town file Chapter 11 bankruptcy and CCAA proceedings

By Caroline Salls

Pittsburgh, Sept. 14 – Golfsmith International Holdings, Inc. filed Chapter 11 bankruptcy Wednesday in the U.S. Bankruptcy Court for the District of Delaware.

According to a statement filed with the court by chief restructuring officer Brian E. Cejka, some of Golfsmith’s Canadian Golf Town affiliates filed a Companies’ Creditors Arrangement Act case in the Ontario Superior Court of Justice.

Asset sales

Cejka said Golfsmith conducted an extensive auction process before filing its Chapter 11 cases, and the process culminated in a binding proposal for the sale of its Canadian business operating as Golf Town to an entity owned by Fairfax Financial Holdings Ltd. and CI Investments Inc., which collectively own roughly 40% of Golfsmith’s senior secured notes. That sale will be completed as part of the CCAA proceedings.

The proceeds of the Golf Town transaction will be used to significantly reduce the Golfsmith debtors’ ABL credit facility obligations.

According to Cejka’s statement, Golfsmith filed its Chapter 11 cases to stabilize its businesses and to complete an operational and financial restructuring around a smaller footprint of profitable Golfsmith stores. The company said it will either sell its U.S. businesses or assets through a court-supervised auction process or restructure through a Chapter 11 plan process.

Golfsmith said it secured a restructuring support agreement from holders of about 40% of its senior secured notes.

Under the proposed bid procedures for the sale of substantially all of Goldsmith’s U.S. assets, bids would be due by 5 p.m. ET on Oct. 17, an auction would be held on Oct. 19, and the sale hearing would be scheduled for Oct. 28.

The sale closing deadline is Oct. 31.

Store closures

The Golfsmith restructuring is expected to result in an operational restructuring of the company’s businesses, including the closure of underperforming stores, a nearly 72% reduction of the obligations under its senior secured notes and the refinancing of the remaining ABL credit facility obligations with a new working capital facility.

The company said it has identified 20 stores “that require prompt closure,” and it may need to close more stores while in Chapter 11. Golfsmith has entered a liquidation consulting agreement with Great American Group, LLC.

DIP financing

In conjunction with the bankruptcy filing, Golfsmith secured a commitment for $135 million in debtor-in-possession financing. Antares Capital LP is the DIP financing agent.

Interest will accrue at either Libor plus 225 basis points or Base rate plus 125 bps.

The facility will mature in March 2017.

Debt details

According to court documents, Golfsmith has $100 million to $500 million in both assets and debt. As of Sept. 13, Golfsmith said its outstanding funded debt obligations totaled $195.7 million.

The company’s largest unsecured creditors are:

• Callaway Golf of Carlsbad, Calif., with a $5.5 million trade debt claim;

• Taylormade Gold Co. Inc. of Carlsbad, Calif., with a $5.12 million trade debt claim;

• Nike USA, Inc., based in Beaverton, Ore., with a $3.47 million trade debt claim;

• PING Inc. of Phoenix, with a $2.35 million trade debt claim;

• Titleist/Acushnet Co. of Fairhaven, Mass., with a $2.13 million trade debt claim;

• Footjoy, Inc. of Fairhaven, Mass., with a $1.86 million trade debt claim;

• Cobra Puma Golf Inc. of Carlsbad, Calif., with a $1.83 million trade debt claim;

• Garmin USA, Inc. of Olathe, Kan., with a $1.28 million trade debt claim;

• Bushnell Holdings Inc. of Overland Park, Kan., with a $1.27 million trade debt claim; and

• Roger Cleveland Golf Co. Inc. of Huntington Beach, Calif., with a $1.02 million trade debt claim.

The company is represented by Richards, Layton & Finger, PA.

Golfsmith is an Austin, Texas-based golf specialty retailer. The Chapter 11 case number is 16-12033.

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