Schutt Sports Inc., has filed for Chapter 11
bankruptcy after losing a patent infringement lawsuit brought by rival
Riddell Inc. Schutt Sports also has sued Riddell seeking to block
collection of the $29 million patent suit verdict that a federal court
jury in Madison, Wis., handed down in August.
The company also said in the bankruptcy filing that it is exploring selling some or all of the businesses or raising additional equity. The team equipment manufacturer said it intends to operate its business without interruption during the Chapter 11 cases as it explores certain strategic options to maximize value and recoveries for all stakeholders.
Schutt and affiliates yesterday filed Chapter 11 bankruptcy
papers in Wilmington, Delaware. They listed both assets and debt
of $50 million to $100 million.
A federal court jury in Madison, Wisconsin, found last month that Schutt's DNA and ION football helmets infringed Riddell inventions and awarded Riddell the damages, Riddell said in a statement at the time.
“The debtors are faced with a softer demand for their products due to cutbacks in school budgets and, at the same time, operate under an over-leveraged capital structure,” Rollen Jones, Schutt's chief financial officer, said in court papers.
The company also faces the $29 million verdict “and continued litigation attacks from Riddell,” Jones added
The company has obtained a Debtor-in-Possession financing facility of $34 million, which will provide sufficient funds to continue normal business operations.
The company is exploring strategic options to maintain long-term health, including selling some or all of the businesses or raising additional equity. The Company has received a proposal for a plan of reorganization funded by a rights offering, backstopped by a group of investors. Riddell, Inc., whose lawsuit was a proximate cause of the need to file chapter 11 would not be given the opportunity to invest in the proposed rights offering.
The proposed plan of reorganization would also provide for a significant deleveraging of the company's balance sheet. The company is considering this proposal, while it also seeks other equity sponsors and acquirers for Schutt. If one of these transactions were to materialize, it would be implemented via a plan or Section 363 auction transaction. The Company has engaged Oppenheimer & Co., Inc., as its investment banker, to explore these options.
The company will continue to pursue vigorously its appeal of the judgment entered against it in favor of Riddell, Inc. during this process.
Schutt Sports is a domestic manufacturer and one of the primary makers of football helmets and faceguards. Three out of four professional football players wear either Schutt gear. Its line include the ION 4D, AiR XP, and DNA line featuring TPU Cushioning. Schutt is also the manufacturer and supplier of bases to Major League Baseball and helmets and protective equipment for the US Olympic Softball Team.