Modell’s Sporting Goods bankruptcy proceedings may be on hold, but the retailer’s utilities providers still expect to be paid.
In a filing on Friday, 18 companies that provide utilities for Modell’s said that they represent an essential expense and asked the court to order payment while the Chapter 11 proceedings are postponed.
“Simply put, it is unjust that the utilities have not received any payments for essential post-petition utility charges during the bankruptcy suspension but [Modell’s] counsel continues to obtain payment for their services,” the filing reads. “The court should compel the [Modell’s] to pay the utilities’ post-petition charges for providing essential goods/services to [Modell’s] during the bankruptcy suspension.”
According to the filing, utilities fees were included under the “non-personnel carrying costs” section of Modell’s modified budget, with $300,000 budgeted through the end of this week. However, the companies say they have received no compensation at this time and worry that Modell’s may allocate the charges under “occupancy charges” — for which it has allotted zero dollars through the week of Aug. 1 ($13,449,000 is budgeted thereafter).
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On March 27, bankruptcy court judge Vincent Papalia suspended Modell’s Chapter 11 case through April 30, 2020, at which time a hearing is scheduled to consider, among other things, a further extension of the suspension. Modell’s requested in an April 20 filing that the case be suspended for another 30 days, through the end of May, in light of continuing COVID-19 restrictions.
Due to stay-at-home orders that have gone into effect at the state and local level across the country, Modell’s for the time being has ceased liquidation sales. All of its 153 outposts are closed as of March 21.
Modell’s filed bankruptcy on March 11, citing a challenging retail environment. The chain listed the estimated value of its assets of between $10 million and $50 million, compared with estimated liabilities of $100 million to $500 million. It plans to liquidate all stores.
Major athletic brands are among Modell’s creditors with the biggest unsecured claims. The retailer owes Adidas USA Inc. $8.97 million.; Nike Inc. has an unsecured claim of $8.87 million; and Under Armour is owed $3.86 million.
The Chapter 11 filing followed a series of financial difficulties that Modell’s has faced in recent years. A WSJ report in February indicated that the firm had hired financial advisers to help rein in challenges. CEO Mitch Modell told the publication that the company had stopped payments to a number of its landlords and vendors, and had begun negotiations with suppliers to remedy the situation. The executive himself loaned the company $6.7 million last year to narrowly avoid bankruptcy. Further, the retailer was recently forced to sell its Bronx, N.Y., warehouse as it sought the cash needed to stay afloat.
Modell’s is just one of many sporting goods purveyors to succumb to the pressures of an evolving retail environment over the past several years. Grand Rapids, Mich.-based MC Sports filed for Chapter 11 protection in 2017; Sports Chalet announced it would close its doors in April 2016; Sports Authority declared bankruptcy in March 2016; and City Sports went out of business in late 2015.