Belk Inc. is the latest department store to go bankrupt.
The Charlotte, N.C.-based company has filed today for Chapter 11 protection in Houston bankruptcy court. However, unlike some proceedings undergone by fellow retail chains, Belk announced that it expects to complete its financial restructuring through an expedited “pre-packaged, one-day” reorganization. It anticipated that the confirmation hearing to approve the restructuring will be held today at 3 p.m. ET.
A little over two weeks ago, lenders holding 99% of Belk’s first lien term loan and 100% of its second lien term loan entered into the previously announced restructuring support agreement. The plan would enable the retailer to raise $225 million of new capital, reduce debt by roughly $450 million and extend maturities on all of its term loans to July 2025.
Belk intends to continue usual business operations throughout its financial restructuring. Under the agreement, it said it will pay suppliers for all goods and services as scheduled, while consumers will still be able to shop both online at Belk.com, through its mobile app and at its roughly 300 locations across 16 Mid-Atlantic and Southern states.
At the end of restructuring, Sycamore Partners — which acquired Belk in 2015 for $3 billion — should retain majority control of the department store, which has secured $225 million in new capital from the private equity firm, as well as global investment firms KKR and Blackstone Credit, plus certain existing first lien term lenders.
Even as vaccine efforts show some promising signs, the retail sector continues to face challenges stemming from the COVID-19 health crisis, which took hold in the United States last March. Hundreds of thousands of storefronts and offices were shuttered for weeks as the outbreak started its spread from coast to coast, which led to a decline in footfall at brick-and-mortar outposts, putting a dent in many retailers’ balance sheets. Companies struggled with mounting debt, leading some big players in the industry — like JCPenney and Neiman Marcus — to file for bankruptcy protection.
While some disruption as tempered, retailers like Belk continue to deal with the ripple effects of the pandemic. In November, just ahead of the critical holiday shopping season, reports indicated that the 130-year-old company fell months behind on payments to some vendors in a bid to shore up liquidity. Separately, over the summer, it laid off an unspecified number of workers who were furloughed primarily from its corporate office as the coronavirus outbreak continued to slam its business.