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Golfsmith International Inc. filed for chapter 11 bankruptcy protection Wednesday after negotiating a restructuring plan that calls for store closures in the U.S. and the sale of its Canadian retail chain.

Court papers show the Austin, Texas-based specialty golf retailer reported assets and debts each in the range of $100 million to $500 million in its chapter 11 petition, which it filed in the U.S. Bankruptcy Court in Wilmington, Del.

The Wall Street Journal had earlier reported the company's plans to file for chapter 11 protection as well as to seek protection under Canada's Companies' Creditor Arrangement Act.

According to people familiar with the matter, the filings include an agreement to sell its Canadian chain of about 50 stores, operating under the brand Golf Town, to two of its largest creditors. The buyers are Toronto fund manager CI Financial Corp. and Fairfax Financial Holdings Ltd., controlled by Canadian financier Prem Watsa.

CI Financial and Fairfax, which own about 40% of Golfsmith's secured debt, have agreed to support Golfsmith's move to seek court protection from its creditors in the U.S. and Canada.

The Canadian chain is healthier than its U.S. counterpart because it has a larger market share in a less crowded golf retail sector.

U.S. stores have suffered because of either over saturation in certain markets or being too large in general, said a source close to the matter.

As part of the bankruptcy filing, Golfsmith will likely close some of these U.S. locations, as well as a small number of stores in Canada, the person added. The company also plans to renegotiate some of its leases with landlords, the person said.

Golfsmith has been in advanced discussions with potential bidders for its U.S. chain of about 100 stores, but according to one person familiar with these talks, a sale was unlikely unless the company closed a number of its stores and trimmed its debt.

Golfsmith's planned breakup comes four years after it was acquired by Toronto-based Golf Town for about $97 million, a deal that was backed by the private equity arm of the Canadian pension fund OMERS. Following the merger, Golfsmith launched an ambitious expansion across the U.S. with large golf emporiums, some of which featured indoor putting greens and golf simulators.

The strategy quickly unraveled as U.S. golf participation levels declined and increased competition from big box and online retailers eroded profit. The tough competitive environment has prompted other sports retailers such as Nike Inc. to shift away from golf equipment sales, while others sports retailers sought bankruptcy protection or closed operations.

Since David Roussy took the helm as chief executive of Golfsmith in 2015 he has focused on beefing up the company's e-commerce side of the business and integrating it with its brick-and-mortar stores, the person close said. Still, the fruits of this labor have yet to be fully realized and are expected to take effect more so over the long-term, said the person.

Goldsmith hired Jeffries LLC and Alvarez & Marsal earlier this year to solicit potential buyers and review various restructuring strategies. More recently it has been advised by Weil Gotshal & Manges LLP And Goodmans LLP.

Write to Jacquie McNish at Jacquie.McNish@wsj.com and Lillian Rizzo at Lillian.Rizzo@wsj.com

(END) Dow Jones Newswires

September 14, 2016 10:35 ET (14:35 GMT)

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