The Chapter 11 bankruptcy filing of retailer Sports Authority, once the country's largest sporting goods retail chain, was big news in March. It was a victim of online retailing competition like Amazon and large retailers like Target and Wal-Mart. The bankruptcy has been mired in legal issues since then.
Over 160 plaintiffs have filed lawsuits against the company regarding payment for approximately $85 million in goods that had already been shipped to stores. Suppliers were concerned that they would not be paid for these products.
Creditors Seek Conversion to Chapter 7
Now, unsecured creditors, including landlords and suppliers, are asking that the retailer's bankruptcy be converted to Chapter 7. That change would mandate that a trustee be appointed to oversee the closings of the stores, which the creditors want expedited.
According to court filings, Sports Authority still owes creditors $240 million. These unsecured creditors claim that Sports Authority is paying $23 million to advisors and attorneys and almost $3 million to executives for bonuses rather than paying money owed to suppliers, landlords and others.
Store Liquidations and Naming Rights Bids Moving Forward
While Sports Authority hoped to be able to sell a number of its stores, its legal issues since filing for bankruptcy have caused it to liquidate more stores than they anticipated in order to save on rent. This has put thousands of employees out of work sooner than they expected.
The company sold its name and other intellectual property to Dick's Sporting Goods at auction. It is also seeking bids for its naming rights to the Sports Authority Field at the Mile High Stadium, which is home to the Denver Broncos.
When a company chooses Chapter 11 as the best way to deal with its financial problems, that's just the first step. Managing that bankruptcy well is key. If that's not done, creditors can take action, as they did in this case, to try to ensure that they receive as much of the money owed to them as possible. That's why it's essential to have bankruptcy attorneys experienced in Chapter 11 bankruptcies on your side.
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