The Sportsman's Warehouse, which is reorganizing in bankruptcy proceedings, is seeking to amend its DIP (debtor-in-possession) facility after defaulting on its credit agreement. The amended facility would enable the hunt and fish retailer to continue to have access to financing and use of cash collateral while protecting the interest of lenders.


 


According to court papers filed the U.S. Bankruptcy Court in Delaware, General Electric Capital Corporation (GECC) sent a letter to Sportsman's Warehouse on May 22 indicating that the retailer was in default of the minimum inventory level covenant under the DIP financing agreement. Sportsman Warehouse also said it realized at the time that it would soon need an additional waiver of the restructuring milestones set forth in the DIP loan. As a result, negotiations with Sportsman's Warehouse, GECC, and another lender, GB Merchant Partners ensued.


 


The DIP facility provided up to $85 million in post-petition financing to Sportsman's Warehouse.


 


The amendment, according to court papers, waives the minimum inventory default and sets new minimum inventory level covenants. It also establishes new restructuring milestones and benchmarks for the commencement of going out of business sales in the event that certain of these restructuring milestones are not met. Further, the amendment increases the availability block by $3 million. Sportsman's Warehouse also agreed to continue to retain their financial advisors to provide consulting services to the CFO on a regular basis.


 


In exchange for the amendment and waiver of the default, Sportsman's Warehouse has agreed to pay $100,000 to GECC and $50,000 to GB.


 


Under the amendment, if GB withdraws its consent to the The Sportsman's Warehouse's use of cash collateral following an alleged default under the amended DIP Order, the retailer may contest whether such default occurred, but may not seek to prime GB's collateral or to further use cash collateral over GB's objection.


 


Sportsman's Warehouse filed a reorganization plan and related disclosure statement on May 22. The plan calls for retailer to emerge from bankruptcy on a stand-alone basis around a group of smaller, profitable stores. Prior to Chapter 11 filing on March 21, Sportsman's Warehouse sold the 15 stores to Canada-based UFA (United Farmers of Alberta), and moved to liquidate 23 others. It now has 29 stores in operation.
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A bankruptcy court hearing on the matter has been scheduled for June 24.


 


The amendment also changes default conditions. Under the amendment, an “Event of Default” would occur:



  • If by June 30 (101 days after the petition date), Sportsman's Warehouse failed by to obtain bankruptcy court approval of a disclosure statement relating to its reorganization plan, and shows commitments to  financing for the plan.
  • If by July 30 (131 days after the Petition Date), Sportsman's Warehouse fails to obtain an order confirming such Plan of Reorganization;

 


If an “Event of Default” occurs under these measures, Sportsman's Warehouse must file a motion to conduct GOB sales by July 31, have selected a “stalking horse” bidder by Aug. 8, and conducted a sales auction by Aug. 13. If a default occurs for any other reason, the company must have prepared bid packages for GOB sales within three business days, selected a “stalking horse” bidder within 10 days, and selected a “stalking horse” bidder within 14 days.