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Sports Authority has abandoned hope of reorganizing and exiting bankruptcy and instead will count on buyers to save parts of its sprawling retail chain, company lawyer Robert Klyman told a judge yesterday, the Wall Street Journal reported. Loaded with more than $1.1 billion in debt, Sports Authority filed for bankruptcy protection in March, saying that it would attempt to trim its operations and restructure, while looking for buyers as an alternate path. Bankruptcy-financing arrangements that won interim approval earlier in the chapter 11 case have allowed lenders to sweep $109 million to pay down their loans, according to the official committee of Sports Authority’s unsecured creditors. That’s been a sore spot for landlords, who believe the timing of the bankruptcy filing, one day after the March rent was due, “had the effect of granting Sports Authority an unsecured interest-free loan of $27 million,” according to David Pollack, lawyer for many of the retailer’s landlords. Sports Authority typically paid about $27 million per month in rent. By filing March 2, the retailer was able to avoid paying the March rent until the end of its case. If there isn’t enough money when Sports Authority’s sales are over, landlords whose premises hosted bankruptcy sales that benefited banks could be forced to take a haircut. Read more. (Subscription required.) 

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New research from Green Street Advisors said that department stores need to close hundreds of locations if they want to regain the productivity they had a decade ago, the Wall Street Journal reported today. The real estate research firm estimates that the closures could include roughly 800 department stores, or about a fifth of all anchor space in U.S. malls. Sears Holdings Corp. alone would need to close 300, or 43 percent, of its Sears stores to regain the sales per square foot it had in 2006, adjusted for inflation, according to Green Street. “Department stores used to be a great catchall for different brands, but today many of the brands have stores of their own, and shoppers can also find them online,” said DJ Busch, a senior Green Street analyst. Sears and other retailers including Macy’s Inc. and J.C. Penney Co. have closed hundreds of stores in recent years as business has shifted to discounters or online merchants like Amazon.com Inc. But the closures haven’t been enough to offset a drop in sales, Green Street said.

Aeropostale Inc., the teen-clothing chain that has suffered years of losses, is preparing to file for bankruptcy as soon as this month, Bloomberg News reported yesterday. The company is looking to reorganize under chapter 11 protection as Aeropostale is trying to work out a loan to finance its operations during the bankruptcy process. A deal to avert a filing or find a buyer also could still emerge. Aeropostale’s trip to bankruptcy court would follow three straight years of losses and a feud with its main lender, Sycamore Partners, which also owns a key clothing supplier. The New York-based retailer has struggled to hang on to teen consumers, who have shifted to online shopping or chains like H&M. The company said last week that it would delay filing its annual report while it explores its options. Aeropostale announced plans in March to evaluate strategic alternatives, tapping Stifel Financial Corp. to help assess a possible sale or restructuring. The company also is working with law firm Weil Gotshal & Manges LLP and FTI Consulting Inc.

Struggling grocer Fairway Group Holdings Corp. has reached a tentative deal with creditors to restructure its debt in bankruptcy, Bloomberg News reported on Friday. The deal would likely put the New York-based gourmet grocery chain into chapter 11 proceedings by the end of May. Fairway’s lenders, led by Blackstone Group LP credit arm GSO Capital Partners, would provide a loan enabling it to continue operations while still in court. The specific terms are still being worked out, including the size of the financing package and whether all store lease contracts will be maintained at its less profitable locations. Under the deal, lenders would take over ownership of the business after Fairway completes its debt restructuring. The company, which is being advised by Greenhill & Co., would focus on turning around the chain without closing the majority of its stores. The company also brought on Alvarez & Marsal Inc. to advise on the restructuring plan.

Academy Sports + Outdoors and Dick's Sporting Goods Inc. have expressed interest in buying the assets of rival U.S. retailer Sports Authority Inc. that are on sale in a bankruptcy auction, Reuters reported on Friday. The auction will determine whether Sports Authority, which opened its first store in Florida in 1987 and expanded nationwide, will be sold off in pieces, or its creditors will hold on to it and try to find a buyer for its entirety. Both Dick's and Academy Sports have submitted letters of interest to buy some of the assets of Sports Authority, which filed for chapter 11 protection in March after seeing sales flatline in the face of online competition. New York City-based Modell's Sporting Goods is also interested in Sports Authority, which has 464 stores across the country. But family-owned Modell's, whose stronghold is on the U.S. East Coast, has not yet decided whether it will participate in the auction.

Vestis Retail Group LLC, the operator of Eastern Mountain Sports, filed for bankruptcy protection after failing to adjust to changes in U.S. shopping habits, especially among young people, Bloomberg News reported today. Vestis, which also runs the Sport Chalet and Bob’s Stores chains, is owned by Philadelphia-based private equity firm Versa Capital Management. The chapter 11 petition filed today in Wilmington, Del., listed as much as $500 million in liabilities and less than $50,000 of assets.  The company said that Vestis BSI Funding II LLC, funds advised by Versa, has agreed to purchase substantially all of its remaining assets. Vestis will seek approval of a court-supervised auction process with the Vestis BSI offer as the opening bid, according to court papers. Vestis will seek approval of up to $125 million in debtor-in-possession financing from its pre-petition lender Wells Fargo Capital Finance LLC to help fund operations while the company restructures. 

Sporting-goods retailer Sports Authority Inc. has pushed back the date for a planned bankruptcy auction amid “substantial” interest from several potential bidders, the Wall Street Journal reported today. Robert Klyman, one of the lawyers for the company, told Judge Mary Walrath of the U.S. Bankruptcy Court in Wilmington, Del. that the retailer hopes for a vigorous bidding contest for the stores and inventory. Judge Walrath yesterday authorized rules for the auction process. When it filed for chapter 11 bankruptcy protection in March, Sports Authority agreed with senior lenders to close a sale by the end of April. The new auction date is in May, and there will be two auctions. Leases for 109 stores being closed go on the auction block May 4 while the sale of pretty much everything else Sports Authority owns is slated for May 16.

PacSun has become the latest retailer to file for Chapter 11 seeking to pull off the herculean task of a quick reorganization, but experts say changes to the Bankruptcy Code have made the prospect more challenging than ever as the retailer and others in the industry continue to reel from structural shifts in the economy, Law360 reported today. Although amendments to the code in 2005, chiefly those that bolstered vendor rights and set stricter timelines on dealing with landlords and leases, are not new, they were enacted during a time when business was relatively good for the retail sector. Fast-forward 10 years and the retail industry is on the ropes, scrambling to deal with an unrelenting migration of consumers to online shopping as well as stubborn weakness in the general economy. While Pacific Sunware of California Inc. appears to be making the proper preparations to deal with retail bankruptcy's changed landscape, the Code amendments mean that the details of any retail restructuring have to be decided on such a quick timeline that they can often turn into chaotic scrums, swelling professional fee bills in the process, practitioners say. “Those changes are the things that killed retail reorganization forever and ever,” said Edward T. Gavin IV of corporate restructuring firm Gavin/Solmonese. “With the time frame and other constraints there is simply less time for herding cats and getting everyone organized.” Read more. (Subscription required.) 

ABI’s Chapter 11 Reform Commission final report contains recommendations to modernize the Code to help struggling businesses, such as retailers, reorganize in today’s business environment. Click here to read more on the recommendations. 

Pacific Sunwear of California Inc. filed for chapter 11 protection, the latest youth-oriented clothing chain to falter in an increasingly cut-throat retail environment, Bloomberg News reported today. Golden Gate Capital, a private equity firm that loaned $60 million to the retailer in 2011, has worked out a deal that will help PacSun avoid liquidation. The pre-packaged bankruptcy agreement involves swapping debt for equity after the retailer emerges from chapter 11. PacSun also will get financing to continue operating during the restructuring process. Without the deal, PacSun might have faced a total shutdown of the surfwear chain, which has struggled to adapt to shifting consumer tastes.