Introduction
On June 10, 2019 (the “Petition Date”), SportCo Holding, Inc.; Bonitz Brothers, Inc.; Ellett Brothers, LLC; Evans Sports, Inc.; Jerry’s Sports, Inc.; Outdoor Sports Headquarters, Inc.; Quality Boxes, Inc.; Simmons Guns Specialties, Inc.; and United Sporting Companies, Inc. (“USC”) (collectively, the “Debtors”) filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.
The Debtors are represented by McDermott Will & Emery LLP as lead counsel and Polsinelli PC as Delaware counsel. The case has been assigned to the Honorable Laurie Selber Silverstein. A hearing on the Debtors’ first day motions was held on June 11, 2019. A meeting to form the unsecured creditor’s committee has been scheduled for June 17, 2019.
Background
Headquartered in Chapin, South Carolina, USC is a marketer and distributor of a broad line of products and accessories for hunting and shooting sports, marine, camping, archery, and other outdoor activities. USC’s customer base consisted of 20,000 independent retailers covering all fifty states.
Since 2015, the Debtors have faced economic and operational challenges that significantly and adversely impacted the operating performance of the Debtors’ businesses including industry-wide decline due to an uncertain political climate, excess inventory leading to discounting, which eroded the Debtors’ margins, the Debtors over-leveraged capital structure which further eroded the Debtors’ margins, significant disruptions in the industry, and disruptions caused by natural disasters.
The Debtors commenced chapter 11 cases in order to run a successful sale process to maximize the value of the Debtors’ assets. No sale motion has yet been filed.
Financial Condition
As of the Petition Date listed secured debt of approximately $249,800,405.00 and $40.9 million of outstanding unsecured debt.
Motion for DIP Financing and/or Cash Collateral Motion
The Debtors are seeking authority to obtain interim DIP financing from Bank of America, N.A., Wells Fargo Bank, N.A., and Regions Bank in the aggregate principal amount of $15 million. The DIP facility is a senior secured superpriority debtor-in-possession loan facility in an aggregate principal amount of $30 million. There are roll-up obligations for prepetition indebtedness.
Other Significant First Day Motions
Wages and Benefits Motion
The Debtors seek authority to pay prepetition wages, business expenses, and prepetition benefits. As of the Petition Date, the Debtors estimate that the aggregate amount of accrued wages and commissions is $307,732.09. The Debtors are seeking authorization to pay prepetition compensation claims up to $13,650 per employee. As of the Petition Date, the Debtors had 321 employees.
Insurance Programs Motion
The Debtors seek authority to maintain existing insurance policies, to renew, revise, extend, supplement, change, or enter into new insurance policies and insurance premium financing agreements as needed. As of the Petition Date, the Debtors pay six insurance policies through instalment payment. The total prepetition amount outstanding on account of the instalment payment policies was $513,662.94. The Debtors are seeking, on an interim basis, the authorization to pay $85,610.49, which represents the July 1, 2019 payment associated with the financed policies.