After six months of rumors and speculation it appears that Athlete’s Foot Group Inc. could be filing for Chapter 11 bankruptcy protection as early as today. Sports Executive Weekly has spoken with a number of people close to the situation and found that the retailer may be running out of options to turn the ship around. When the talk first starting swirling in the summer a senior official at TAF told SEW that the talk was just a rumor and had no merit. TAF officials have declined to confirm or deny the current bankruptcy talk.
Sports Executive Weekly has been taking a number of e-mails and calls recently from vendors concerned about the situation, particularly the timing so close to year-end.
TheDeal.com this week reported that a “source close to the company” said that TAF is close to engaging UCC Capital Corp., an investment bank that specializes in providing retail financing, to advise it on the restructuring.
Any BK filing would certainly serve to help TAF move closer to its a pure franchising model, a model that was broadly discussed in the trade after CEO Bob Corliss and a group of senior managers acquired the company in January this year from former French parent Rallye SA.
While the acquisition brought no new operating capital to the company, TAF has announced a number of financing deals that should have given it some maneuvering room. Prior to the MBO, TAF had announced a privately placed bond issue through UCC Capital and just last month secured $20 million in financing through GMAC Commercial Financing.
Talk on the street has vendors pointing to Nike as the primary player here on timing and the inevitability of a filing.
If TAF does file, it will clearly give them the opportunity to dump bad leases in their corporate store group. The franchise stores are reportedly doing fine and TAF likes the developing strategy there. TAF could continue to operate the remaining corporate stores, but SEW sees this as an opportunity for a sale of those doors to another retailer, with either The Finish Line or Genesco as potential suitors.
There is no confirmation that a deal is already in the works to clean out the bad leases in preparation for a sale, but we wouldnt place bets on it not happening either.
One humorous component to the story on TheDeal.com was comments attributed to a managing director at USBX Advisory Services, indicating that “retailers of athletic shoes have been under pricing pressure from Wal-Mart Stores Inc. and other mass merchandisers.”
>>> Yep. That’s it. Footaction failed because of pricing pressure from Wal-Mart. Now theres someone that has a good grasp of the branded athletic footwear market. It’s troubling when you realize investors actually listen to this stuff
