Consignments to Sports Authority; Well, This is Awkward

Just for fun, let’s say you’re a brand that has some product at The Sports Authority (TSA) on consignment.  When TSA filed for bankruptcy, your finance and credit people probably high fived each other out of the sheer joy of knowing that they could expect to be paid for that product when it was sold or at least get the product back- which would not be the case if you had sold the product to TSA and made yourself an unsecured creditor.

Uh, well, maybe not.

Sports Executive Weekly as well as the Wall Street Journal and other publications are reporting that TSA is suing a bunch of its suppliers who have consignment product at TSA.  TSA wants to be able to keep the product and I guess the money from selling the product.  Apparently, there are 160 suppliers who have consigned product to TSA (Doesn’t anybody just sell product to retailers anymore?) and we’re talking about $85 million of merchandise.

The bankruptcy judge has told TSA that they have to return the consigned goods to the consigning brand if requested and pay them the money they already owe vendors for consigned product that’s been sold.  Apparently there have been a number of such requests.  But TSA, which has until April 28th to come up with a buyer or another form or reorganization that will let it survive, doesn’t want to do that because they need these brands and their products, not to mention the cash, to continue operating.

So we’ll see.  If the lawsuit is successful, I guess these consignors end up as unsecured creditors.