Sports Authority Liquidation Claims Another Supplier Casualty As Performance Sports Goes Under

Performance Sports Group (PSG), maker of Bauer ice hockey equipment and Easton baseball and softball gear, filed for bankruptcy protection earlier today in Canada and the United States.  Among other things, the company cited "weakening consumer demand," the liquidation of Sports Authority back in March 2016 as well as the subsequent bankruptcy of an "internet baseball retailer" as key drivers of their financial downturn.  According to the company's most recent annual filing, 51% of Easton sales were to "big box" retailers.

The performance of the Company’s business in fiscal 2016 and fiscal 2017 to date has been significantly impacted by adverse market and   economic conditions and related customer credit issues. The baseball/softball market experienced a significant downturn in retail sales across all product categories, but particularly in the Company’s important bat category. This weakening of consumer demand, coupled with the Chapter 11 filing by one of the largest U.S. national sporting goods retailers and the bankruptcy of an internet baseball retailer, has reduced the Company’s sales with respect to baseball and softball products.


The consolidation of hockey retailers in the U.S., and the bankruptcy of a key U.S. hockey customer, has reduced customer  demand for products as the Company’s customers have continued to reduce their inventory  levels. The Company’s results throughout fiscal 2016 and  fiscal  2017  to  date have  also continued to be impacted negatively by foreign currency exchange rates, specifically, the depreciation of the Canadian dollar and other world currencies relative to the U.S. dollar.

Not surprisingly, PSG's EBITDA collapsed for the LTM period ended in February 2016 which coincided with the Sports Authority bankruptcy filing in March.



As part of the bankruptcy process, PSG has secured a stalking horse bid from Sagard Capital and Fairfax Financial for $575mm which will serve as a baseline bid for a competitive auction process.

In  connection  with  the  Restructuring  Process,  the  Company has entered  into  an  asset  purchase agreement (the “Purchase Agreement”) with  an acquisition  vehicle  to  be  co-owned  by  an  affiliate  of Sagard  Capital  Partners,  L.P. and Fairfax  Financial  Holdings  Limited (collectively,  the “Purchaser”), pursuant  to  which  the  Purchaser  has  agreed  to  acquire  substantially  all  of  the  assets of  the  Company and  its  North  American subsidiaries for  U.S. $575 million in  aggregate,  assume  related  operating liabilities and serve as a “stalking horse” bidder through the Restructuring Process. The Purchase Agreement sets  the  floor,  or  minimum  acceptable bid,  for  an  auction  under  the  supervision  of  the Courts,  which  is designed  to  achieve  the  highest available or  otherwise  best  offer.  The  proceeds  to  be received on the closing of the acquisition should be in excess of the Company’s outstanding secured indebtedness and are expected to provide meaningful recoveries to the Company’s other stakeholders. A final sale approval hearing is expected to take place  shortly after completion of the auction with the anticipated  closing of  the  successful  bid to  occur in  the  first quarter  of calendar  year 2017,  subject  to receipt  of  applicable  regulatory  approvals  and  the  satisfaction  or  waiver  of  other  customary  closing conditions.

Just another sign of the "strong" consumer benefiting from the Obama "recovery."

Weak COnsumer