Sportsman’s Warehouse, the Utah-based sporting retailer, filed for bankruptcy in Delaware on March 21, 2009. Sportsman’s Warehouse filed for bankruptcy along with its wholly-owned subsidiaries (collectively, the “Debtors”). At the time they filed bankruptcy, Debtors employed over 3,200 employees in their stores, headquarters and distribution centers. According to Debtors’ Declaration in Support of First Day Motions (the “Declaration”), Debtors’ assets in 2008 totaled $436 million, against liabilities of $452 million. Further, revenues reached $741 million in 2008, yet Debtors incurred operating losses of $25 million.
Events Leading to Bankruptcy
According to Debtors’ Declaration, “Sportsman’s Warehouse is another retailer victim of the worldwide global recession.” From 2006 to 2007, Debtors grew their operations by adding twenty-one stores. However, by the end of 2007, Debtors’ same store sales began to decline. The drop in sales caused Debtors to experience liquidity problems, forcing Debtors to refinance various loans with their lenders. Despite refinancing with their lenders, Debtors liquidity problems continued throughout 2008.
Debtors’ problems worsened when Seidler Equity Partners, an investor group that purchased a 25% equity stake in the Debtors in 2007, exercised its right to “put” the shares it previously purchased back to the Debtors. Looking for cash, Debtors entered into a letter of intent with United Farmers of Alberta (“UFA”) on November 3, 2008. The parties closed the transaction approximately two weeks before Debtors filed for bankruptcy. Under the deal, UFA purchased 15 of Debtors’ stores for $90 million.
Prior to filing for bankruptcy, Debtors decided to begin a store-closing process in order to close under performing stores. Gordon Brothers Retail Partners, LLC was hired to conduct the store closing sales and on March 11, 2009 store closing sales began.
Objectives in Bankruptcy
As stated in their Declaration, Debtors filed bankruptcy hoping “to consummate either a sale or plan of reorganization centered on the ongoing operations of a smaller, viable chain of Sportsman’s Warehouse stores.”
This bankruptcy proceeding is before the Honorable Christopher S. Sontchi of the United States Bankruptcy Court for the District of Delaware. Debtors are represented by Skadden Arps Slate Meagher & Flom LLP.