Prince Sports files bankruptcy; lender to get new equity under plan

By Caroline Salls

Pittsburgh, May 1 - Prince Sports, Inc. and its U.S. affiliates filed Chapter 11 bankruptcy Tuesday in the U.S. Bankruptcy Court for the District of Delaware.

Prince has also filed its proposed plan of reorganization and related disclosure statement following extensive negotiations with its pre-bankruptcy lender and expects to move quickly toward confirmation of its plan, the release said.

"After considering several business options, the board of directors and the senior management team firmly believe that the Chapter 11 filing is not only a necessary step but also the right thing to do to ensure a secure future for Prince," president and chief executive officer Gordon Boggis said in the release.

Prince said it will utilize the Chapter 11 process to develop a more competitive business model.

The company said the proposed restructuring would relieve it from in excess of $60 million of secured debt.

Creditor treatment

Treatment of creditors under the proposed plan will include:

• Holders of other secured claims will either be paid in full in cash or receive the collateral securing the claim or retain the lien on the collateral and have the claim reinstated;

• Holders of other priority claims will be paid in full in cash;

• Subsidiary interests will be unaffected by the plan, except to the extent otherwise required by restructuring transactions;

• Holders of pre-bankruptcy lender secured claims will receive a pre-bankruptcy lender secured claim distribution. This distribution will be comprised of new equity interests in the reorganized company;

• Holders of general unsecured claims will receive a share of a general unsecured claim distribution and a cash distribution. The cash distribution will only be available to general unsecured creditors who grant specified releases.

The unsecured claim plan distribution will include any proceeds from the settlement or prosecution of avoidance actions and causes of action; and

• Holders of interests and interest-related claims will receive no distribution.

Despite economic constraints, Prince said consumer demand for its products and interest in the brand remains strong worldwide.

"We anticipate to emerge from this period as a more efficient, performance racquet sports brand with a more competitive model in the market, while eliminating the economic constraints that have prohibited the brand from achieving its potential," Boggis said in the release.

Prince said it plans to continue to pay employee wages and benefits and service customers during the Chapter 11 process.

Subsidiaries outside of the United States, including Prince Europe, Prince Italy, Prince France, Prince Benelux, Prince Taiwan and Prince China, are not subject to the proceedings and are expected to operate in ordinary course.

"We have a long history, and are planning for an exciting future, focused on game-changing, product innovation, engineered to take players' games to the next level," Boggis said in the release.

"Securing this protection will help us to continue to focus on that vision."

The company said it has an exciting new product pipeline and is developing plans on how to best bring these innovations to market.

DIP financing

In conjunction with the bankruptcy filing, Prince has secured a commitment for up to $2.5 million in debtor-in-possession financing that will give its vendors and suppliers confidence in its position to operate in Chapter 11.

ABG-Prince, LLC is the DIP lender and the company's pre-bankruptcy lender.

The facility will mature on the earliest of Aug. 20, 30 days after entry of the interim order if a final order has not been entered, the date of repayment in full of the DIP loans and termination of the commitment and the effective date of a plan of reorganization.

Interest will be one-month Libor plus 800 basis points.

The company is seeking interim access to $1 million of the financing.

Debt details

According to court documents, Prince Sports has $50 million to $100 million in both assets and debt.

The company's largest unsecured creditors include:

• Da Sheng (Bvi) International Holding Ltd. of Taichung City, Taiwan, with a $1.97 million trade claim;

• Pais International Ltd. of Kowloon, Hong Kong, with a $1.94 million trade claim; and

• Marshal Industrial Corp. of Kowloon, Hong Kong, with a $1.9 million trade claim.

The company is represented by Pachulski Stang Ziehl & Jones LLP.

Prince Sports is a sporting goods company based in Bordentown, N.J. The Chapter 11 case number is 12-11439.

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