Golfsmith International Holdings Inc., a U.S. golf retailer owned by the private equity arm of the Ontario Municipal Employees Retirement System, will be selling Canada-based Golf Town Canada Inc. to a group of investors.
The consortium of buyers includes Fairfax Financial Holdings Ltd. and CI Investments Inc.’s Signature Global Asset Management, according to a news release yesterday. Both companies have also agreed to help Golfsmith recapitalize and restructure its U.S. business.
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“Following a thorough exploration of all available options and alternatives to strengthen the business, the company’s board of directors determined that proceeding with these strategic transactions is in the best interest of the company and its stakeholders,” said a company spokesperson.
“We are confident that these transactions will provide an overall solution that will return the businesses to paths of profitability and growth.”
As a result of the transaction, OMERS will no longer own the newly restructured Golfsmith, according to a spokesperson for the U.S. retailer. The changes mean Fairfax and CI Investments will hold more than 40 per cent of its second-lien secured notes that are due in 2018. The company plans to use the sale proceeds to repay a large chunk of its first-lien credit facility and cancel existing secured notes. As part of the restructuring, it will issue new second-lien notes and equity to the current holders of the existing secured notes. The new secured notes will have an extended maturity date and an option for Golfsmith to pay interest in kind.
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In August, Benefits Canada reported the retailer was “exploring strategic initiatives” amid reports it might file for bankruptcy protection. In announcing the latest development, the company said it would implement the transactions through court-supervised restructuring proceedings under the Companies’ Creditors Arrangement Act in Canada and Chapter 11 provisions in the United States.
In 2012, OMERS acquired Golfsmith as part of a merger with Golf Town, which the pension fund bought for about $240 million in 2007. A spokesperson for OMERS refused to comment on the Golfsmith transactions. In explaining the golf retailer’s troubles, media reports have cited the waning interest in golf in recent years as well as its high debt load.