By Tom Hals
WILMINGTON, Del. (Reuters) - Unsecured creditors of the bankrupt retailer Sports Authority are seeking to convert the case to a quick liquidation, saying in a Friday court filing the company should not waste its dwindling funds preparing a plan to end its Chapter 11.
The Englewood, Colorado-based chain entered Chapter 11 bankruptcy with 464 stores in March and hoped to sell some locations as an ongoing business. However, the case has been mired in a protracted fight between lenders and suppliers over the use of the company's cash, and the chain ended up running going-out-of-business sales.
The largest U.S. sporting goods retailer, Dick's Sporting Goods Inc (N:DKS), acquired the Sports Authority name and other intellectual property at a June auction.
The unsecured creditors argued the company is "administratively insolvent," meaning it cannot even pay the cost of running its bankruptcy case, which was filed in Wilmington, Delaware.
To allow Sports Authority to remain in Chapter 11 and spend money preparing the required bankruptcy exit plan would make creditors worse off, according the unsecured creditors.
"It is time for these cases to end," said the Friday court filing by the official committee of unsecured creditors.
If the case were converted to a Chapter 7 liquidation, a trustee would be appointed to wind down the case much more quickly than if it remained in Chapter 11.
In Friday's filing, the creditors also said that Sports Authority is unfairly prioritizing some administrative costs of the case over others. The creditors said $23 million has been set aside for lawyers and advisers and $2.85 million for bonuses for executives, yet landlords and suppliers are still waiting for their administrative payments.
The chain has liquidated most of its assets, including inventory, store leases and intellectual property.
Sports Authority still has to sell its naming rights to the Mile High Stadium in Denver, Colorado, the home stadium for the Denver Broncos. Bids for the contract on the naming rights, which extend through 2021 are due Monday, according to an advertisement on the website of a liquidator hired to sell them.
The creditors requested that the U.S. Bankruptcy Court in Wilmington, Delaware hear their argument for converting the case on Aug. 2, the same day the court will hear arguments for approving a deal between the retailer and its lenders.
Unsecured creditors oppose that deal, which divides up claims on Sports Authority's remaining cash.