Motorsports Authentics Looking Towards Bankruptcy

Jim BobCorrespondent IOctober 7, 2009

DOVER, DE - SEPTEMBER 25: A fan holds a die cast replica of the #24 DuPont Chevrolet driven by Jeff Gordon in hopes of gettin an autograph after practice for the NASCAR Sprint Cup Series AAA 400 at Dover International Speedway on September 25, 2009 in Dover, Delaware.  (Photo by Geoff Burke/Getty Images for NASCAR)

According to a filing with the U.S. Securities and Exchange Commission by Speedway Motorsports on Tuesday, Motorsports Authentics could be headed towards bankruptcy.

Motorsports Authentics, which is owned jointly between Speedway Motorsports, Inc. and the International Speedway Corporation, has been seeing a drop in sales on officially licensed NASCAR products from what is believed to be because of the current economic recession in the United States.  To combat with the loss in sales, Motorsports Authentics stopped paying royalties based on income projects, as they had done in the past.

However, since Motorsports Authentics began paying royalties based on actual profit instead of projected profit totals on merchandise on August 31, 2009, they have been receiving notices from a unknown number of licensors claiming default against Motorsports Authentics.

“MA (Motorsports Authentics) has received notices from certain licensors alleging default under the license agreements if MA does not pay unearned royalties within stipulated cure periods,” an excerpt from the SEC filing read. “MA is attempting to obtain extensions from licensors where cure periods, including any subsequent extensions, have lapsed or are near termination.”

The company, however, is currently renegotiating deals with all of its licensors to allow them to continue paying fees based on actual profit instead of projected numbers.  Motorsports Authentics hopes that all deals can be renegotiated soon, however the leading seller of NASCAR-licensed products may look towards bankruptcy to stay afloat.

“MA is attempting to renegotiate its license agreements with essentially all present significant licensors of NASCAR merchandising on terms that allow MA reasonable future opportunities to operate profitably,” the filing continued. “Should such negotiations not be successful, should MA management decide to allow license defaults to remain uncured or should licensors not grant extended cure periods and exercise their rights under the agreements, MA’s business and its ability to continue operating could be severely impacted. MA is exploring other business strategies to turn its business around. If such efforts are not sufficient or timely, MA could ultimately pursue bankruptcy.”