Lexpert Magazine

34 LEXPERT MAGAZINE | JULY/AUGUST 2017 Failed Financials Performance Sports' woes were hardly a surprise by the time it sought bankruptcy protection. Since August 15, 2016, an army of lawyers on both sides of the border had begun to amass around the company. at day, the company announced — to the hor- ror of its investors, retailers, suppliers and creditors — that it was delaying its annual financial statements. at put PSG in dan- ger of defaulting on hundreds of millions of dollars of loans. Ominously, PSG also announced that day that its audit commit- tee had retained independent counsel to conduct an internal investigation into the company's prior financial statements. Two days later, PSG revealed it was un- der investigation by both the Ontario Se- curities Commission (OSC) and the US Securities and Exchange Commission (SEC). ough details were vague, the reg- ulators were reviewing what circumstances led to PSG's failure to file annual financials. en PSG was hit with a shareholder class action. e statement of claim alleged that investors were duped when PSG failed to disclose that its supposedly record sales were the product of a "fraudulent scheme" pressuring retailers to buy more products than they needed under the threat of elimi- nating their volume discounts. ere was one positive note in all this: on August 30, PSG announced that it had negotiated a 60-day extension on its credit facilities with its existing lenders through October 28, 2016. If it were to file its 10K annual report by then, it might yet stave off default on its loans. The Fuse at, recounts John Tuzyk, a Toronto partner at Blake, Cassels & Graydon LLP who led a team of 27 lawyers on behalf of Sagard's Canadian legal contingent, "ef- fectively put a 60-day fuse on Performance Sports trying to figure out what it was go- ing to do at the end of that period." at short fuse ignited more than six months of urgent and intense work by executives, lawyers and financial advisors trying to both launch an auction process and, should that fall short, rivet together a complex cross-border deal that, as prospec- tive buyers, Sagard/Fairfax hoped would preserve the value of PSG's Bauer, Easton, Mission, Maverick and Cascade brands be- fore they were sidelined to history. As the months wore on — though there were appraisers aplenty — no one else tried to top Sagard/Fairfax. No auction was ever held. e Sagard/Fairfax partnership bought virtually all PSG's assets in a trans- action that ultimately closed February 27, 2017, creating a new company, since named Peak Achievement Athletics Inc. Happier Days With the history of its equipment and ap- parel brands, dominance in hockey and baseball, its ventures into soball, lacrosse and soccer, PSG's ending was one few would have bet on. Performance Sports Group traces its roots back to 1927, when Roy Charles Bau- er started the Bauer Canadian Skate Co. in Kitchener, Ontario. In 1995 Nike pur- chased Bauer's parent company, Montréal- based Canstar Sports Inc., for $395 mil- lion. irteen years later, in 2008, it sold Bauer to Québec-based Roustan Inc. and US private-equity firm Kohlberg & Co. for $200 million. It would list on the TSX in 2011, changing its name to Performance Sports Group (PSG) in 2014 when it also listed on the NYSE. All was well for the company, recalls Mi- chael Wall, General Counsel of PSG from 2008 until the insolvency transaction. "I'd been with the company for nine years and the first eight were great," says Wall, who'd previously been Chief Legal Officer for the Boston Bruins and TD Garden. "Bauer is an iconic brand and it had a great business. It was number one in hockey when Nike spun it off in 2008." In the years aer Nike, Bauer under- went an ambitious growth spurt under CEO Kevin Davis. It made seven acquisi- tions in six years, including Cascade Sports (lacrosse) and Combat Sports (baseball "[Sagard and PSG] agreed that the primary objective of this whole exercise is to preserve the value of the iconic and innovative brands that the company has … with time being of the essence." JOHN TUZYK > BLAKE, CASSELS & GRAYDON LLP | ART OF THE DEAL | PHOTO: SHUTTERSTOCK

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