As SGB Update first reported Thursday, Joe's Sports & Outdoor & More, the Northwest retailer formerly known as G.I. Joe's, has filed for Chapter 11 bankruptcy protection. Initial reports indicated that the retailer planned to keep all 30 of its stores open while it explored attempted to obtain credit, raise additional capital from third parties or finding a strategic partner. Court documents provide a different strategy, one that favors the liquidation of all assets by the end of the month.

In early reports, a Joe's spokesman said the filing gave them more time to “continue to operate all of (Joe's) 30 stores while it can work on options.”  The spokesman conceded that “One option is a sale,” but he didn't believe that was the exclusive option. “There are a number of others,” he told

Joe's said it had obtained $51 million in new borrowing from Wells Fargo Retail Finance, subject to court approval. It also said it will continue to pay its employees wages and benefits.  The Debtor-in-Possession financing “contemplates” a sale of the Joe's business within approximately 30 days of the petition date.


“Though the economy has taken its toll on the retail industry, our operations and initiatives have performed well against the competition because of our strong brand, our people and the loyalty of our customers,” said Hal Smith, CEO and president. “This restructuring process will allow us time to address our capital challenges so that we can potentially emerge an even stronger company with a firm financial position.”

Smith took over as CEO and president after Joe's was sold and longtime leader Norm Daniels retired.


Joe's, formerly called G.I. Joe's, listed both assets and debt of $100 million to $500 million in Chapter 11 documents filed in U.S. Bankruptcy Court in Delaware. The 30 largest consolidated creditors without collateral backing their claims are owed a total $12.8 million, court papers show.

The top 5 sporting goods industry companies include Columbia Sportswear ($888.3k), Carhartt Inc.($830.8k), Rocky Brands ($707.0k), Under Armour ($647.9k) and All Sports Supply ($443.9k).

The chain was purchased by private equity firm Gryphon Investors of San Francisco in 2007. The decision to file for bankruptcy follows a strategic review announced by the company last month during which it temporarily laid off warehouse workers and explored ways to bring more capital to the business.

“We at Gryphon are deeply disappointed that Joe’s is filing for Chapter 11 bankruptcy protection,” said David Andrews, President and Managing General Partner at Gryphon. “After initially purchasing the company in 2007, Gryphon recruited new CEO Hal Smith in 2008 and invested more equity capital this time last year to provide additional liquidity as the economy and retail environment worsened. Given Hal Smith’s strong first year of implementing positive operational changes despite the historic economic downturn, we were prepared to invest additional capital once again to help restructure the company outside of court. Unfortunately we could not come to mutually acceptable terms with the lenders. It is our hope that a solution is found through the Bankruptcy process that enables Joe’s to continue on as a viable business for many years to come.”

Based on court documents obtained by SportsOneSource Media, Joe's indicated that the amount outstanding under a Wells Fargo loan and security agreement was approximately $47 million on the petition date.  That facility is secured by a first priority lien on all of the retailer's assets, including inventory, accounts receivable, equipment and intellectual property.  A second loan and security agreement with Wells Fargo that also includes Crystal Capital Fund Management as administrative agent and collateral agent had approximately $35.2 million outstanding on the petition date.


Joe's had retained Financo, Inc. as investment banker prior to the bankruptcy filing to pursue a sale of the retailer “as a going concern.”  The filing states they intend to use the Chapter 11 process to either “gain access to liquidity” or “execute on one or more options to create value for stakeholders.”  The second option could include the sale of the business as a going concern, a liquidation of the stores, a going-out-of-business sale at some or all of their stores or some combination of the above.
Joe's is seeking approval from the Court for a sale process that would seek bids a select a “stalking horse” suitor by March 20, 2009, with final bids due by March 27, 2009.   The final sale transaction would occur by April 3, 2009.  Joe's intends to pursue a two track sale process simultaneously by soliciting bids for a sale of as many stores as possible as a going concern and at the same time soliciting bids for conducting GOB sales.


Look for more details on this story, including a full list of the top unsecured industry creditors, in this week's issue of Sports Executive Weekly and The B.O.S.S. Report.