A few months ago, the sporting goods retailer Sports Authority declared bankruptcy. At first the company was planning to close only a few stores and work on reorganizing, but just a few weeks ago, it was announced that the company will now be closing all of its stores and wrapping up operations. Other than the four stores in the Milwaukee area that will be closing, it did not seem like this bankruptcy was going to impact our area that much, until it was revealed that Sports Authority is asking its bankruptcy judge to void a sponsorship contract it has with the Brewers.
If you check the back of printed Brewers tickets, you will notice a coupon for $10 off a purchase of $50 or more at Sports Authority. The retailer presumably does not want to honor these coupons on top of its already priced-for-liquidation discounts, so it is asking the bankruptcy judge to void the contract.
If this request is approved, it is unclear how it will impact the Brewers. Has Sports Authority already paid for the full season, or does it owe the Brew Crew money? If it has already paid to sponsor the whole season, and the contract is cancelled, will the Brewers have to refund part or all of the money since the season is ongoing? Will they have to print new tickets?
Our firm is not involved with the Sports Authority bankruptcy, but this sort of situation is very familiar to us. One of our specialties is business bankruptcies, and we work with both businesses who are having financial difficulties, and businesses doing business with troubled businesses.
When one business is facing bankruptcy, it can have a ripple effect on every business that business does business with. For example, if a business goes bankrupt and stops paying its creditors and ordering new merchandise, the other businesses that business does business with might also go bankrupt if they were counting on orders or money from the troubled business to keep their cash flowing. In order to prevent this sort of chain reaction, businesses who know they are facing a rough patch will bring us in to negotiate what is known as a workout agreement.
A workout agreement is a creative solution that allows companies who are facing what could be mutually assured destruction, to literally work out a new agreement. Sometimes we renegotiate new contract terms, or simply delay a scheduled payment, but sometimes we negotiate things like a real estate swap in lieu of payment. What a workout agreement ends up looking like really depends on what is mutually beneficial to the companies involved, but it is always a gratifying situation to be a part of since it often is the thing that allows a troubled business to stay open and get back on its feet without bringing down the entire supply chain.
It is obviously too late for a workout agreement to save Sports Authority from bankruptcy, but hopefully whatever happens in the bankruptcy will not be too much of a burden on the Brew Crew. Heaven knows the Brewers don’t need any additional challenges right now as they fight to stay out of the cellar and above .500.