A South Carolina gun and sporting goods distributor is filing for bankruptcy amid allegations of mishandled funds borrowed by its majority owner.
News outlets report Ellett Brothers has its first hearing in bankruptcy court on Tuesday.
Lending company Prospect Capital Corporation is suing the distributor’s majority owner, Wellspring Capital Management. Prospect says it lent Ellett Brothers $160 million to shore up the distributor, but the money went instead to Wellspring shareholders.
Wellspring is a private equity firm in New York that bought Ellett Brothers in 2008.
Attorneys for Ellett Brothers and for Wellspring couldn’t immediately be reached for comment.
The distributor’s corporate parent, SportsCo Holdings Inc. says it plans to liquidate its holdings, citing excessive debt and inventory.