Modell’s Sporting Goods is preparing to file for Chapter 11 bankruptcy, according to reports.
The news comes after the Wall Street Journal reported on February 28 that Modell’s vendors had rejected the 141-store chain’s proposal for a slower payment schedule over the next three years.
In mid-January, Modell’s said it was seeking concessions on payments from vendors and landlords to provide time to enact a restructuring and avert a bankruptcy filing.
RBC, an investment bank, was hired to help find an outside investor to acquire a minority stake in the company to shore up finances. Berkeley Research Group’s restructuring team and the legal firm Cole Schotz were also hired to support a restructuring, possibly as part of bankruptcy proceedings. Modell’s recently announced it was closing 19 stores in the first phase of the restructuring.
The New York Post, which first reported that Modell’s was preparing for a filing, said Modell’s has stopped seeking out a white-knight investor and will soon give up renegotiating terms with its vendors.
Mitchell Modell, the company’s CEO, told the Post select companies are seeking to buy the retailer out of bankruptcy, and that the company’s Bronx warehouse has been sold to raise funds.
A source told the Post that Modell’s is hoping JackRabbit, which acquired Olympia Sports last year, will acquire the retailer in bankruptcy proceedings. Modell confirmed to the Post that the earliest the company would file for bankruptcy was to be on Sunday but declined to confirm whether the company is in discussions with JackRabbit.
Modell also confirmed the coming filing with Bloomberg.
He told Bloomberg that Modell’s plans to file with a stalking-horse bidder in place in order to support a sale of the company in a bankruptcy auction.
“Anything could happen” in the process, which is still under negotiation, Modell told Bloomberg. “The best-case scenario is that we maintain as many jobs as we can.”
Modell’s sales were down $200 million in 2019. The challenges have been blamed on a bankruptcy scare the prior year that led to inventory shortages for most of 2019. Warm weather in the northeast over the holiday season, the loss of six days of selling between Thanksgiving and Christmas, and ongoing competition from Amazon were other factors cited in a holiday shortfall.
Photo courtesy Modell’s