Maurice Sporting Goods Files Bankruptcy, Assets Acquired by Middleton Partners, Receives $20 Million in DIP from Bank of Montreal

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New York, Nov. 21, 2017— Maurice Sporting Goods, Inc. and its subsidiaries (the “Debtors”) filed petitions for Chapter 11 of the Bankruptcy Code on November 20, 2017 in the District of Delaware under Case No. 17- 12481.[1]

The Debtors have employed the law firm of Young Conaway Stargatt & Taylor, LLP as general bankruptcy counsel, Development Specialists, Inc. as restructuring financial advisor, Silverman Consulting as financial advisor, Livingstone Partners LLC as investment banker, and Epiq Bankruptcy Solutions, LLC as notice and claims agent.[2]

On November 5, 2017, Livingstone Partners secured a letter of intent from Middleton Management Company, LLC (“ Middleton Partners ”), which the debtors intend to file a bid within the bankruptcy case and conduct a competitive 363 sale process, with Middleton Partners as the stalking horse.[3]

Maurice Sporting Goods, Inc. was founded in Chicago by Maurice Olshansky in 1923 as a store front selling recreational goods.[4] Since then, Maurice Sporting Goods and its subsidiaries have become one of the largest distributors, manufactures, in-store service of outdoor sporting goods in North America including fishing, shooting and athletic goods, with five warehouse locations in the United States and Canada.[5] Headquartered in Northbrook, Illinois, the Debtors service 15,000 store fronts on 4 continents, including Walmart and Academy Sports + Outdoors.[6] Since the 90s, the Debtors enjoyed organic growth and expanded internationally, acquiring Matzuo America, Inc., a fishing products company, Danielson Outdoors Company, Inc., in 2007, Canadian outdoors sporting goods Redl Sports Distributors In 2011, and various assets in 2014 to expand its “First Source” and “Rivers Edge” products.[7]

Maurice Sporting Goods had to file Chapter 11 bankruptcy after accumulated liquidity constraints, including investing in a “state-of-the-art” facility and the bankruptcy of retailers it serviced, such as The Sports Authority (D. Del 16-10527), MC Sports (W.D. Mich. 17-00612), Gander Mountain (D. Minn. 17-30673), and Sport Chalet 17-30673 (D. Del 16-10977).[8]

Rightfully, Patrick O’Malley, the Debtors’ Chief Restructuring Officer, describes the last couple years as a “generally challenging retail environment,” yet they had decided to invest in combining all its U.S distribution centers into one state-of-the-art facility which opened in the fall of 2016, with operating costs greatly exceeding expectations.[9] Coupled with the recently weak Canadian dollar performance and the Debtors’ leveraged debt from the 2014 asset acquisitions, operating cash flow and liquidity became scarce. Notwithstanding reporting over 90 years of consistent profitability in 2016, Maurice Sporting Goods filed for Chapter 11 bankruptcy protection with over $100 million in outstanding secured and unsecured debt obligations.[10]

In an official press release, the Debtors announced they had secured a commitment from the Bank of Montreal of up to $20 million in debtor-in-possession (DIP) financing.[11] In court documents O’Malley stated DIP financing is needed to continue day-to-day operations, explaining that “[o]verall, I believe that the relief requested in the DIP Motion is in the best interests of the Debtors’ estates and is necessary to avoid immediate and irreparable harm, and the DIP Motion should be approved.”[12]

Middleton Partners is an experienced private investment firm, but other companies can also submit competing offers under Section 363 of the U.S Bankruptcy code.[13] For 6 months prior to the petition, Livingstone Partners marketed and negotiated the sale of the Debtors’ business and publicly announced on October 9th the acquisition by a third-party buyer which was also a competitor, but 10 days later the prospective buyer withdrew.[14] Maurice Sporting Goods Chief Executive Officer, Jory Katlin, expressed relief to have Middleton Partners as a stalking horse, stating

[w]e are extremely pleased that Middleton Partners is going to purchase Maurice’s assets and continue our strategic vision and customer and vendor relationships. It has been a challenging couple of years, I am excited we have found the right partner to strengthen the Company’s balance sheet and unleash new funding to fuel future growth.[15]

Keith Jaffee, a principal with Middleton Partners, defined the acquisition of Maurice Sporting Goods in line with their investment endeavors in high potential companies.[16]

 

Cristina Lipan is a bankruptcy attorney and partner with the law firm of Shipkevich PLLC. Cristina is admitted in the Southern and Eastern Districts of New York and regularly practices before the United States Bankruptcy Court. For more information on this matter, you can reach Cristina at  646-867-0098 or at  clipan@shipkevich.com

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  • [1] Voluntary Petition for Non-Individuals Filing for Bankruptcy, Doc. No. 1, Case No. 17- 12481, D. Del. Filed November 20, 2017 (the “Petition”).
  • [2] Petition, Resolutions of the Board of Directors of Maurice Sporting Goods, Inc. (No. 17- 12481).
  • [3] Declaration of Patrick J. O’Malley In Support of Debtors’ Chapter 11 Petitions and First-Day Motions, Doc. No. 2, Case No. 17- 12481, D. Del. Filed November 20, 2017, (the “Declaration of Patrick J. O’Malley”), ¶ 30.
  • [4] Declaration of Patrick J. O’Malley, ¶ 8.
  • [5] Declaration of Patrick J. O’Malley, ¶ 4.
  • [6] Declaration of Patrick J. O’Malley, ¶ 8.
  • [7] Declaration of Patrick J. O’Malley, ¶ 9.
  • [8] Declaration of Patrick J. O’Malley, ¶ 27.
  • [9] Declaration of Patrick J. O’Malley, ¶ 26.
  • [10] Declaration of Patrick J. O’Malley, ¶¶ 25, 18.
  • [11] PRnewsWire.com, Maurice Sporting Goods, Inc. To Be Acquired By Middleton Partners, November 20, 2017, https://www.prnewswire.com/news-releases/maurice-sporting-goods-inc-to-be-acquired-by-middleton-partners-300559506.html (The “Press Release”).
  • [12] Declaration of Patrick J. O’Malley, ¶ 72.
  • [13] Press Release
  • [14] Declaration of Patrick J. O’Malley, ¶ 29.
  • [15] Press Release
  • [16] Press Release
  • Image Credit: The Gear by Christian Jensen via CC Licensing

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