Modell’s Sporting Goods, which filed for Chapter 11 bankruptcy protection on March 11, won court approval to begin liquidation sales on its remaining 141 stores despite concerns from landlords.
The New York-based sporting goods chain moved to liquidate after being unable to find a buyer. Going-out-of-business sales, scheduled to run through April 25, are expected to fully cover both secured debt and post-petition administrative costs, said a court hearing on Friday, according to law360.
According to the company’s bankruptcy filing in New Jersey, Modell’s had $43.4 million in secured debt, as well as more than $100 million in unsecured claims. As reported, Adidas and Nike were the top unsecured creditors, both owed nearly $9 million. Under Armour was third with an unsecured claim of $3.8 million. The filing also noted that Modell’s pension fund is underfunded by about $25.8 million.
Lawyers representing landlords at the hearing were concerned over whether GOB sales would be able to cover post-petition costs, including rent, according to law360.
One argued that suspensions and postponements of professional sports leagues, school closings and any interruption in Little League and other sports play could significantly impact the liquidation recovery. The lawyer noted that Modell’s had already attributed its recent sales struggles partly on poor performances by local teams, including the Jets, Giants and Knicks.
Some lawyers representing landlords wanted the cash collateral motion giving professional fees priority to be eliminated.
Approving the interim orders, U.S. Bankruptcy Court Judge Vincent F. Papalia said Modell’s would sustain “immediate harm” without permission to use cash collateral. He said landlords could raise objections to the final orders before a scheduled April 6 hearing if a compromise among parties can’t be reached.
“These are uncertain times, and there might be some bending to reflect that,” the judge said.
Photo courtesy Modell’s
