Belk Inc. confirmed today its plans to file for Chapter 11 protection and said it has already cinched a plan with its majority owner, Sycamore Partners, as well as most of its lenders to slash debt and fast-track its bankruptcy proceedings.
The 130-year-old department store announce today that it has entered into a restructuring support agreement with Sycamore, a private equity firm focused on retail, and holders of over 75% of its first lien term loan debt and holders of 100% of its second lien term loan debt, that would cut $450 million in debt as well as extend the maturities on all term loans to July 2025. Under the terms of the RSA, Sycamore Partners, which acquired Belk in 2015, would retain majority control of the retail chain.
Belk, which said it expects to continue operating stores and other business operations as normal, has also received financing commitments for $225 million in new capital from Sycamore Partners and global investment firms KKR and Blackstone Credit as well as some existing first lien term lenders.
“Belk has a 130-year legacy of providing quality products at great prices,” said Belk CEO Lisa Harper in a statement. “Like all retailers navigating COVID-19, our priority has been the safety of our associates, customers and communities. As the ongoing effects of the pandemic have continued, we’ve been assessing potential options to protect our future. We’re confident that this agreement puts us on the right long-term path toward significantly reducing our debt and providing us with greater financial flexibility to meet our obligations and to continue investing in our business, including further enhancements and additions to Belk’s omnichannel capabilities.”
The department store expects to complete its so called “pre-packaged” bankruptcy by the end of February.
Despite its ambitious plans to move forward with little disruption, Belk is only the latest retailer — Neiman Marcus and JCPenney among them — to be forced down the bankruptcy path as pandemic-induced pressures weigh on retail balance sheets. In November, just ahead of the critical holiday shopping season, reports indicated that Belk fell months behind on payments to some vendors in a bid to shore up liquidity. Over the summer, the company laid off an unspecified number of workers who were furloughed primarily from its corporate office as the pandemic continued to slam its business.
Belk currently operates nearly 300 stores across 16 states in the Mid-Atlantic and the South. The 133-year-old company was purchased for $3 billion in 2015 by private equity firm Sycamore Partners, which recently snapped up bankrupt Ann Taylor parent Ascena Retail Group Inc. in a $540 million agreement.