Bankrupt sports-equipment distributor Maurice Sporting Goods Inc. came to court last week and intends to sell the business to investment firm, Middleton Management Co. The dilemma that was facing Judge Christopher Sontchi was that Maurice and its primary lender, BMO Harris Bank N.A, were seeking approval for a provision that would allow Middleton to collect a $150,000 breakup fee in the event the sale process falls through, according to a WSJ Pro Bankruptcy commentary. What is unusual in the case of Maurice, according to the commentary, is that the company wanted Judge Sontchi to approve the fee before the parties had finalized an asset purchase agreement or submitted to the court papers outlining how the proposed sale process is expected to play out. What is on file is a signed letter of intent from Middleton to serve as a stalking-horse bidder in a proposed chapter 11 auction for Maurice’s assets. The fee, as well as the conditions under which it would be awarded to Middleton, is outlined in the letter of intent and papers related to a bankruptcy loan being provided by BMO Harris. Despite expressing misgivings about the fee, Judge Sontchi approved the provision, saying he wasn’t willing “to play chicken with the survival of this case” over a relatively small amount of money.
