Sports Authority has reached a deal that will allow it to sell pre-bankruptcy goods bought on consignment as part of its ongoing liquidation efforts to maximize value of the estate.
Soon after filing for bankruptcy in early March, Sports Authority filed lawsuits against some 160 of its suppliers over consignment sales totaling $85 million worth of merchandise. The vendors wanted to stop the sale of their products and have them quickly returned but Sports Authority wanted to sell the merchandise. Vendors had argued that they should be paid when items are sold under consignment arrangements rather than lenders getting first priority over such funds.
As part of the settlement, vendors will be payed a “vendor carveout” that represents a percentage of the vendor’s entitlement under former consignment agreements. The payments will range from 25 percent to 49 percent. The amounts may be adjusted based on the sell-through at liquidation sales. Details of the settlement, including carve-out amounts are available here.
Sports Authority filed for Chapter 11 bankruptcy in March, planning to close only about one fourth of its 463 stores. Failing to reorganize, however, Sports Authority chose in early May to liquidate instead. Going-out-of-business sales at its remaining 320 stores have been taking place since Memorial Day and are scheduled to be completed by the end of July.
