Based Golfsmith Seeks Chapter 11 Bankruptcy Protection

Golfsmith International Inc. filed for chapter 11 bankruptcy protection Wednesday after negotiating a restructuring plan that calls for store closures in the US and the sale of its Canadian retail chain. The retailer said it would try to sell part of the chain as a going concern and shed some underperforming stores.

The buyers are Toronto fund manager CI Financial Corp. and Fairfax Financial Holdings Ltd., controlled by Canadian financier Prem Watsa.

The Austin, Texas, company and 12 affiliates, including Golfsmith International, submitted petitions in the U.S. Bankruptcy Court for the District of DE in Wilmington. Upon completion, the transaction will result in a deleveraging of the Golfsmith business through the cancellation of the existing Secured Notes and the issuance of new second lien notes and 100% of the equity in restructured Golfsmith to holders of the Company’s existing secured notes.

Financial terms of the Golf Town deal were not immediately available, but Goldsmith said it will use the proceeds from the sale to repay a substantial portion of its first lien credit facility.

Golfsmith declined comment on the store closings. Nike is owed $3.5 million, according to the DE bankruptcy filing.

Golfsmith’s leveraged growth attempts earlier this decade led to debt approaching $200 million, according to multiple reports. Sources familiar with the matter told the Journal that Golfsmith will also sell off its healthier Canadian chain, made up of 50 stores that operate under the brand Golf Town, to two of its largest creditors.

In 2012, Golfsmith merged with Canada-based Golf Town, creating one of the largest specialty golf retailers in the world.

The golf industry hasn’t recovered the popularity it enjoyed at the turn of the century, when Tiger Woods dominated the sport and attracted hordes of new fans.