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Sporting goods chain eyes bankruptcy filing


Sports Authority is taking steps towards filing for Chapter 11 bankruptcy protection, according to Bloomberg.

The retailer has a debt payment due in 10 days and in talk with its lenders about a reorganization plan under which it would close as many as 200 of its more than 450 stores, the report said.

Sports Authority reportedly skipped a $20 million in interest payment in January on a $343 million loan. It has 10 days to make the payment.

Sports Authority saw its corporate credit rating downgraded by Moody’s Investor Service on Jan. 20 after the retailer said it elected to not make a $21 million interest payment that was due on Jan. 15. Moody’s cut its corporate family rating and $300 million secured term loan due 2017 rating to Caa3 from Caa1 issued a negative outlook on the company.

“Sports Authority's Caa3 CFR reflects the high likelihood of default due to the missed interest payment. The company is engaged in discussions with its lenders regarding ways to address debt maturities beginning in May 2017 as well as improving its capital structure, which Moody's believes is unsustainable at current weak levels of operating performance. The company's leverage is very high and interest coverage is weak,” according to Moody’s. “Sports Authority's operating performance has been inconsistent over the past several years due to weak execution, adverse weather, high promotional activity and competitive pressure, and a challenged consumer. Despite recent efforts to implement an operational improvement plan, sales have once again turned negative due to store closures and weak comparable store sales, while EBITDA margins have been pressured by expense deleveraging, lower merchandise margins and higher shipping costs related to growing e-commerce sales.

Formerly a retail powerhouse, Sports Authority has struggled in recent years under tough competition from such retailers as Dick’s Sporting Goods, Walmart and Amazon and specialty merchants like Lululemon and Athleta. In 2006, the chain was bought by a group led by Leonard Green & Partners LP.

Sports Authority recently confirmed that it had laid off about 100 workers at its corporate office, the Denver Business Journal reported.

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