Modell’s Wants to Put Bankruptcy Plans on Ice Amid Coronavirus Crisis

Modell’s Sporting Goods is requesting that Chapter 11 proceedings be halted after it was forced to temporarily cease liquidation sales amid the coronavirus pandemic.

On Tuesday, the New York-based sportswear purveyor filed a motion asking a New York bankruptcy judge if its case could be suspended for up to 60 days — arguing that liquidation sales are the “cornerstone” of bankruptcy proceedings.  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 closed as of March 21.

“COVID-19 has prevented the Debtors from conducting the robust liquidation sales that seemed possible just one week ago; it has left the Debtors with no choice but to temporarily ‘mothball’ their operations,” the filing reads.

However, Modell’s landlord creditors have filed a letter in response to the motion expressing “serious concerns” about the relief being sought.

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“Simply put, it is not appropriate to prevent a creditor from seeking relief from the Court during the suspension period. Creditors cannot predict how COVID-19 events will affect their own situation,” the letter reads.

The landlords have asked Modell’s to put together a revised plan by the last week of April. An emergency hearing has been scheduled for today.

Modell’s filed for Chapter 11 protection 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.

According to court documents obtained by FN, some of the largest 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.

Amid the retailer’s challenges, its CEO considered selling a minority stake in the family-owned business. Modell himself loaned the company $6.7 million last year to avoid bankruptcy, and the company 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.

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