Golf Company Known for Its Free Giveaways Enters Bankruptcy

(Bloomberg) -- It appears giving away free golf clubs may not be the secret to overcoming bad luck, painful litigation and a lack of management.

Warrior Custom Golf Inc., the manufacturer best known for its television commercials boasting no-strings-attached giveaways of golf balls and clubs, filed for bankruptcy in Texas this week. The Chapter 11 petition lists assets up to $10 million and debt of as much as $50 million. Ten affiliates also sought protection including Warrior Golf LLC.

Warrior Golf owns and manages 18 golf courses across the country, including Cimarron Golf Resort located in Southern California. Cimarron is the company’s most profitable course and fell prey to flooding during peak season last year, according to court papers.

The same “challenging environment” other golf industry participants have faced in recent years, a “lack of management depth and professional financial support” and debt obligations contributed to the filing, Chief Restructuring Officer Jeremy Rosenthal wrote in a court declaration filed Tuesday.

The need to file was accelerated by the entry of a judgement stemming from Warrior Custom Golf employees allegedly misleading and soliciting more than $1 million in investments from an elderly man for almost a decade.

The complaint filed in Manatee County, Florida last year details how in 2007 a Warrior Custom Golf representative allegedly called 86-year-old Cecil Mellinger in an attempt to sell him discounted golf clubs. When Mellinger declined, the representative offered an investment opportunity that would turn $5,000 into $20,000 in three years, according to court papers. Mellinger invested $15,000.

Over the next nine years, according to the complaint, the company solicited additional money 23 times, funneling more than $1 million from Mellinger into various LLCs -- even after Mellinger suffered a stroke that impaired his cognitive abilities. In 2017, the investments were converted to promissory notes worth roughly $422,352 or 40 cents on the dollar. The court required Warrior Custom Golf, Warrior Acquisitions and Warrior Golf to post collateral totaling about $1.3 million by March 4 to stay the execution of the judgement.

Lacking the funds to post the collateral while they challenge the default judgment and to avoid the preferential judgment lien being filed against the Royal St. Augustine Golf Club in St. Augustine, Florida, the companies and related entities filed for bankruptcy. On Wednesday, a Texas judge approved the company’s request for up to $2.55 million of debtor-in-possession financing, according to court papers.

Warrior Custom Golf has generated more than $270 million in sales to about 1.3 million customers since it was founded by Brendan Flaherty in 1998. Warrior Custom Golf generally has annual revenue of more than $15 million, per the filings. Warrior Acquisitions, the golf course management entity, generated about $13 million of annual revenue in recent years and posted an operating loss of $680,000 last year.

The company declined to comment through a spokesperson. A press release published Wednesday says the company “has ample liquidity to fund operations” and remains open for business.

The case is: Westwind Manor Resort Association Inc., 19-50026, U.S. Bankruptcy Court, Southern District of Texas (Laredo).

©2019 Bloomberg L.P.