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Sports Authority Reaches Deal With Suppliers on Store Closing Sales

Amid the mess that already comes with a bankruptcy filing, Sports Authority has been dealing with a slew of suppliers that didn’t want their goods sold in going-out-of-business sales.

The sportswear retailer filed for bankruptcy on Mar. 2 and said it would shutter 140 of its 450 stores. Shortly after, consignment suppliers with shoes and other winter gear still in Sports Authority stores said they wanted their goods returned to them instead of being sold at the sales, according to the Wall Street Journal.

Sports Authority argued that it needed the merchandise to sell in the closing sales—worth roughly $85 million—or the business would be “devastated.”

So the retailer sued the suppliers to stop them from being able to seize the goods but has now reached a settlement with those suppliers.

If Wilmington, Delaware, U.S. Bankruptcy Court Judge Mary Walrath approves the settlement at Tuesday’s hearing, the gear would stay in Sports Authority’s stores throughout the bankruptcy proceedings, and vendors will get 60 percent of the sales.

Proceeds from the sales are expected to boost Sports Authority’s cash position, which would be favorable in the face of $643 million in debt. According to the Journal, Sports Authority will sell the goods at liquidation locations and stores it hopes to keep open, and put the proceeds in an escrow account for future use.

Judge Walrath will also decide if Sports Authority can use the balance of its $595 million bankruptcy loan.

The retailer already got approval to use up to $275 million of the loan, but creditors have argued that this coupled with $66 million in positive cash flow through Apr. 30, means there’s no need for Sports Authority to use the remainder of the loan because of the $22.3 million in fees and interest that come with it.

Sports Authority’s bankruptcy filing outlined the immediate sale of a portion of its stores and finding a buyer for the rest, but time for finding that buyer is running out. As per deadlines put in place under bankruptcy filing rules, the retailer has until the end of April to find someone to take those stores off its hands.