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Sports Authority Suits Up for Chapter 11

Less than a week after Sports Authority laid off 100 employees, mostly from its corporate headquarters, the struggling sporting-goods chain began gearing up to file for bankruptcy.

Citing people familiar with the private proceedings, Bloomberg Business broke the story Thursday that Sports Authority was in talks with lenders including TPG Capital Management LP on a Chapter 11 reorganization deal ahead of a looming debt-interest payment.

Part of the plan could involve closing nearly half of the roughly 450 stores it operates across the country.

The news followed the Englewood, Colorado-based retailer’s decision last month to miss a $20 million interest payment on its $343 million subordinated debt, which sparked concern that it could trigger cross-defaults across the rest of its arrears. According to data compiled by Bloomberg and Moody’s Investors Service Inc., Sports Authority has at least $643 million in debt.

The sources revealed that TPG provided the retailer with $70 million of a $95 million asset-backed loan late last year, allowing it to operate through the holiday season.

Sports Authority has struggled to compete in recent years with rival athletic apparel and accessories retailers, such as Dick’s Sporting Goods, Lululemon and Athleta. It was bought in a $1.3 billion management-led buyout by private-equity firm Leonard Green & Partners LP in 2006.