A bankruptcy court judge last week approved an auction process to sell Schutt Sports on Dec. 14. Bids for the company are due Dec. 10. As previously reported, Schutt Sports, in bankruptcy proceedings since Sept. 6, last week received an offer from Kranos Intermediate Holding Corp. to acquire the company for $25.1 million plus the assumption of liabilities valued at $2.1 million.
Kranos, a Delaware-listed company, will act as a “stalking horse” bidder to entertain other offers in bankruptcy court. Kranos will receive a breakup fee of $1 million if its bid is not successful. At the current price, the sale would result in insufficient funds to pay senior secured lenders with no payouts to unsecured creditors.
Unsecured creditors had objected to the sale process, partly because it felt it overly-favored the secured lender, Bank of America, which provided Schutt with $34 million in debtor-in-possession funding.
Unsecured creditors said the bidding process would give secured lenders ” the ability to liquidate their collateral as quickly as possible, with little regard to the financial wreckage left behind.” Unsecured creditors also objected to the requirement that the initial bid at the auction must be at least $1 million more than Kranos' offer, believing it would “chill participation in the auction and thus will prevent the realization of the maximum value for the debtors’ assets.” Subsequent bids can be made in $200,000 increments.
Rival Riddell Inc. also had objected to the sales terms because they excluded any liabilities tied to its lawsuit against Schutt. The bankruptcy judge ruled against the motions by Riddell and the unsecured creditors committee.
Schutt filed for bankruptcy protection in Delaware one month after being hit with a $29 million patent infringement verdict in favor of Riddell. The filing halted enforcement of the patent verdict as well as related litigation while Schutt pursued a sale.
