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Prince Sports heads to confirmation

by Aviva Gat | Published June 20, 2012 at 2:36 PM

Tennis racket maker Prince Sports Inc. can serve its reorganization plan to creditors as it seeks to exit bankruptcy protection by the end of summer.

Judge Kevin J. Carey of the U.S. Bankruptcy Court for the District of Delaware in Wilmington on Tuesday, June 19, approved the disclosure statement for Prince's prenegotiated plan, according to debtor counsel Laura Davis Jones of Pachulski Stang Ziehl & Jones LLP.

The private equity-backed debtor is now set for a July 27 confirmation hearing.

During Tuesday's hearing, Carey also gave Prince final approval to use its $2.5 million debtor-in-possession loan from prepetition lender ABG-Prince LLC and approved a licensing agreement with Battle Sport Science LLC, Jones said. ABG-Prince is an affiliate of Authentic Brands Group LLC, a New York brand-licensing company that owns sports consumer brands including Sportcraft, TapouT, Iron Star and Sinister, as well as rights to use Marilyn Monroe's name and likeness and to license certain photographs.

Prince on May 9 requested permission to license certain trademarks to Battle Sport. According to the motion, Battle Sport already does business with ABG-Prince, which is slated to receive the debtor's equity under the plan.

The official committee of unsecured creditors originally opposed the deal, on the grounds that Prince did not market the trademarks and merely sought to enter into an agreement with Battle Sport due to ABG-Prince's previous relationship.

Jones said Prince, ABG-Prince and the committee reached a global resolution regarding the licensing agreement, leading to a modified version that was filed Monday.

The licensing agreement runs through Dec. 31, 2022, but can be renewed for an additional 10 years. Battle Sports must pay Prince 7.5% of its net revenue as royalties, plus 2.5% of net revenue on products sold from sublicenses. The minimum royalty payments must total $5.25 million per year.

The original licensing agreement was to end Dec. 31, 2017, and had a minimum annual royalty payment of $3 million.

Prince, owned by Providence, R.I., PE firm Nautic Partners LLC, filed for Chapter 11 on May 1 with a prenegotiated plan that would give 100% of its equity to ABG-Prince in return for its $65 million claim. The debtor amended the plan on Monday.

ABG-Prince would waive its rights to any deficiency claim under the plan. Other secured creditors and holders of priority claims would be paid in full. General unsecured creditors would receive a pro rata share of $500,000 and proceeds from certain causes of action for an estimated 2.7% recovery, while old equity holders would be wiped out.

The Bordentown, N.J., debtor is a premier branded sporting goods company that develops, sources and markets racket sports equipment, footwear, apparel and accessories for tennis and indoor court sports such as squash and racquetball, according to Prince president and CEO Gordon Boggis.

Prince also sponsors some of tennis' most elite athletes, including David Ferrer, Gael Monfils, Vera Zvonareva and the Bryan brothers.

Founded in 1970, Prince is known for innovating new designs, including the "oversized" racket, the "longbody" racket and other racket technology. Its brands include Viking Athletics, which specializes in platform tennis equipment, and Ektelon, which makes racquetball equipment.

Prince blamed its bankruptcy on reduced demands for its products combined with increased competition over the past five years. In response to its decline, in November 2010, Prince sought to sell the rights to certain brands and its operations in China to pay down significant debts to its then-lenders. The process ended in February 2011 because Prince did not receive any acceptable bids for the marketed assets. Instead, Prince sought to upgrade its products and incorporate new advertising strategies to increase demands for its products.

Prince then commenced a second sale process in October in hopes of selling its assets or entering into additional licensing agreements. Prince engaged Robert W. Baird & Co., which found that several parties were interested in acquiring the company as a going concern.

By March, Baird was in talks with three potential purchasers that each were offering less than Prince's outstanding secured debt.

Meanwhile, on March 27, ABG-Prince acquired Prince's $65 million in secured debt from GE Capital Corp. and Madison Capital Funding LLC and indicated its interest in acquiring the company. Prince then decided a sale to ABG-Prince would be its best option to reorganize successfully.

The lender's DIP, priced at LIBOR plus 800 basis points, will aid the restructuring process.

The loan includes a $100,000 commitment fee and matures Aug. 20.

Prince must obtain approval of its disclosure statement by June 29, win confirmation by Aug. 6 and exit bankruptcy by Aug. 20 to stay in line with the financing.

Carey on May 2 approved interim use of the loan.

The company had $54.2 million in assets and $77 million in liabilities as of Dec. 31.

Along with Jones, David M. Bertenthal, Joshua M. Fried and James O'Neill of Pachulski Stang are debtor counsel.

Richard A. Chesley, Matthew M. Murphy and Stuart Brown of DLA Piper (US) LLP represents ABG-Prince.

Michael P. Richman, Mark A. Salzberg and Anthony Nguyen of Patton Boggs LLP and Jeffrey C. Wisler, Zhun Lu, Marc J. Phillips and Kelly M. Conlan of Connolly Bove Lodge & Hutz LLP are counsel to the creditors' committee.

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