Omega Sports has filed a reorganization plan that calls for the North Carolina-based retailer to reemerge from bankruptcy proceedings around its seven remaining stores and to pay off creditors over the next three years.
Omega Sports, which operates all its stores in North Carolina, filed for bankruptcy on March 25, 2021 in the Western District of North Carolina. The filing listed liabilities of about $5.56 million and between 100 and 199 creditors.
The plan calls for future revenue to be used to pay back its two secured creditors, The Fidelity Bank and American Express.
“Through this plan, the debtor will continue to operate as a going concern, and it is committing its revenues generated during the debtor’s post-petition operations and its continued business operations and future revenues to fund the plan,” Omega Sports wrote in the reorganization plan.
The retailer said it would restructure its existing secured claims, and it would commit its actual disposable income for a period exceeding three years to make distributions to secured and unsecured creditors under the plan.
“The debtor should be able to pay its operating expenses and generate sufficient disposable income and profits to fund the plan,” according to the filing.
Omega Sports’ financial projections call for total revenue of $10.3 million in fiscal 2021, $13 million in fiscal 2022, $14.7 million in fiscal 2023, and $16 million in fiscal 2024. Online sales are forecast to amount to 16.7 percent this year before increasing to represent 16.5 percent in 2022, 17.6 percent in 2023 and 18.5 percent in 2024.
Losses of $1.12 million and $33,000 are projected for fiscal 2021 and 2022, respectively, but a return to profitability is expected by 2023. Profits are expected to reach $318,000 in 2023 and $726,000 in 2024.
Fidelity was owed $1.26 million on a line of credit and $728,385 for a term loan at the time of the bankruptcy filing. Fidelity asserts liens on substantially all of the Debtor’s assets, including its inventory, equipment, and proceeds to secure the Fidelity Loans. American Express was owed $111,671.
Unsecured creditors comprising trade creditors, vendors and former landlords are owed a combined $2.8 million. Craig Carlock serves as CEO, with his wife, Kristin. Craig Carlock holds unsecured claims totaling $1.41 million for loan advances made to fund Omega’s operations. The Carlock’s acquired the retailer in April 2017.
Under the reorganization plan, Omega has requested being given an additional three years, to October 8, 2024, to pay off Fidelity’s line of credit and term loan with interest payments accruing over the payment period.
The secured claim held by American Express will be paid in equal monthly installments at the fixed rate of interest of 4.25 percent per annum, with the principal balance of the restructured loan amortized over a period of ten years.
For unsecured creditors, the plan would set two sets of creditors: allowed critical vendor and service provider claims and allowed noncritical vendor and service provider claims.
After all allowed priority vendor claims are paid, critical vendor and service provider claims would get 70 percent of the actual disposable income from the plan’s approval through December 31, 2014. Allowed noncritical vendor and service provider claims would get 30 percent.
The plan provided a list of critical vendors and service providers and the respective claim amounts owed as part of the bankruptcy. They include:
- Under Armour, $225,824.83
- New Balance, $178,490.60
- On Running, $134,074.72
- Brooks Sports, Inc., $105,254.93
- Deckers Outdoor (Hoka), $87,476.54
- Asics America Corp., $50,225.76
- Saucony Domestic Footwear, $44,785.45
- Adidas America, $33,440.15
- Mizuno USA, $27,307.85
- Celerant Technology Corp., $14,607.63
- Implus Footcare, LLC (Balega), $11,818.18
- ImImobile, $8,960.00
- Garmin, $6,612.88
- Easton Sports, Inc., $6,051.61
- Boardriders Wholesale, LLC, $5,000.00
- Puma North America, Inc., $4,000.00
- Mueller Sports Medicine, $3,575.54
- Superfeet, $3,049.25
- Columbia Sportswear Co., $2,874.20
- Wilson Sporting Goods Co., $2,208.72
- Babolat, $2,000.00
- O.A., $1,954.24
- Thorlo, Inc./Trimfit Global, Inc., $1,612.95
- SABG, Division of GCE International, Inc., $1,493.40
- K-Swiss, Inc., $1,424.32
- Vizari Sport USA, $1,400.00
- Kavu, $1,200.00
- Head/Penn Racquet Sports, $1,070.74
- ING Source, Inc., $1,020.94
- Nuun Active Hydration, $960.00
- Corkcicle, $850.00
- Flagship Brands, LLC (Feetures), $817.10
- Zensah Co., $800.00
- EN-R-G Foods, Inc., $764.89
- Goodr, $725.48
- Athletic Specialties, Inc., $586.02
- Twin City Knitting Co., $513.63
- Hurley International, $250.00
- Heritage Technologies, $101.65
- Triad Pawprints, $97.92
Priority vendor claims represent claims on goods received within 20 days of the bankruptcy petition date. Non-critical vendors and service providers consist of several landlords, advertising agencies and other business partners.
According to the plan’s liquidating analysis, Fidelity would receive between 22 percent and 45 percent of what is owed for its line of credit and term loan. American Express would be made whole for its loan since it has the priority secured loan.
Unsecured creditors and Craig and Kristin Carlock would not receive any recovery under the liquidating analysis.
Fidelity was listed as having provided Omega with federal Paycheck Protection Plan loans of $771,700 and $673,848. As with other PPP loans taken by companies that later filed for bankruptcy protection, there is the potential for part or all of those two loans to be forgiven by the federal government and The Fidelity Bank reimbursed.
A confirmation hearing will take place on July 28, 2021, at 9:30 a.m.
In the plan, Omega Sports noted that its financial performance started to decline with the increase in online sporting goods sales and competition created by larger competitors, but its business was substantially harmed on a temporary basis due to the pandemic. For example, the company’s gross sales for the fiscal year ending December 31, 2019 were approximately $17.5 million, while its gross sales for the fiscal year ending December 31, 2020 were roughly $9 million. As a result of this financial distress, Omega Sports had closed five stores between June 2020 and August 2020.
Omega Sports operates seven stores in North Carolina located in Charlotte, Greensboro, High Point, Wilmington, Raleigh, and Winston-Salem. The retailer employs 86 people, consisting of 24 full-time, salaried employees, four full-time, hourly employees, and 59 part-time hourly employees.
Photo courtesy Omega Sports