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Bankruptcy judge approves 'store closing' sales at all Performance locations, sets ASE auction for January

Published December 7, 2018

DURHAM, N.C. (BRAIN) — A bankruptcy judge has ruled that Advanced Sports Enterprises can hold store closing sales at 102 Performance Bicycle locations. The court also pushed back the auction of ASE's assets to mid-January. The auction had originally been scheduled for Dec. 18.

U.S. Bankruptcy Judge Benjamin Kahn said Gordon Brothers Retailer Partners, which is the liquidation company managing sales at the stores, can promote sales events using language including "store closing sale," "sale on everything," "everything must go," or similar sales. The language used to promote the sales has been under discussion and last week Kahn barred the use of language suggesting the stores were closing until the subject was discussed at a hearing Thursday. Kahn said all stores must still comply with state or local laws on sales language.

Otherwise, Kahn's order filed Friday is largely the same as the interim order he issued last week. Gordon Brothers must continue to accept gift cards and certificates issued before the bankruptcy filing, and must honor returns of merchandise bought before the filing under the same terms as when the items were bought. As in the earlier order, Kahn noted that the stores should follow state and local laws requiring them to accept returns of items sold during the sales that have "latent" defects. Gordon Brothers may not supplement the sales with its own merchandise.

Store employees have told BRAIN that they've been told not to honor Performance's prepaid service contracts. Kahn's order did not mention those contracts. In 2016 when the California-based sports retail chain Sports Chalet declared bankruptcy, Performance offered Sports Chalet customers discounts and free bike safety checks. 

In a separate order, Kahn approved a bidding process for ASE's assets, which include the ASI distribution business, trademarks, several buildings and the leases for Performance stores.

The bid deadline is Jan. 11. An auction will be held Jan. 15 if there are competing qualified bids. All assets will be offered individually and in groupings.

Copies of the bidding procedures order are available at the website of Kurtzman Carson Consulting, LLC: kccllc.net/advancedsports. Those interested in bidding can contact Mike Smith at D.A. Davidson & Co., at msmith@dadco.com.

ASE has issued Worker Adjustment Retraining Notification (WARN) Act notices to employees in Pennsylvania and North Carolina. Federal law requires companies with more than 100 employees to give 60 days notice of possible layoffs affecting more than 50 employees at a single location.

In North Carolina, where ASE is headquartered in Chapel Hill, the company said 200 employees could lose their jobs. In Pennsylvania, where ASI is based, layoffs could affect 60 employees, according to the WARN notice recorded there last month. ASE has about 83 employees in Philadelphia. BRAIN has not been able to find records showing that ASE has issued WARN notices in other states, but it's unlikely the business has any other locations with more than 50 employees. At the time of its bankruptcy filing, ASE had 1,944 employees, including 1,662 at the Performance retail operation.

In a memo Thursday, ASE told employees that the store closing sales would be extended to all locations.

"At this point in the process, it is not knowable which, if any, of the Performance retail stores would be sold at the Chapter 11 auction. Our investment banker, D.A. Davidson, is continuing to market Performance and we are also receiving a lot of interest from other specialty bicycle retailers who are interested in many of the Performance locations," the memo read in part.

"We remain focused on selling the business and finding the best outcome possible," it concluded.

A hearing on ASE's request to extricate itself from manufacturing and licensing contracts has been rescheduled to Dec. 20.  Ideal has objected to the motion.

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