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Sycamore Planning to Fast-track a Belk Chapter 11

David Moin
·3 min read

Belk, the regional department store in the South owned by Sycamore Partners, plans to restructure its finances through a “prepackaged” Chapter 11 bankruptcy reorganization.

Under a “restructuring support agreement” revealed Tuesday with Sycamore, the private equity firm and majority owner of Belk, and debt holders, Belk plans to reduce its debt by $450 million, and extend maturities on all term loans to July 2025.

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Sycamore is fast-tracking the bankruptcy and expects the transaction and the Chapter 11 process to be completed by the end of February.

Belk also said it will continue normal operations through its financial restructuring process, but did not indicate whether the bankruptcy plan would involve store closings or layoffs. Belk operates about 300 stores mostly in Southeastern states. Chapter 11 bankruptcies typically enable retailers to void leases and close stores without penalty.

Belk said its suppliers will be “unimpaired and will continue to be paid in the ordinary course for all goods and services provided to the company.”

The agreement was made with those holding more than 75 percent of its first-lien term loan debt and holders of 100 percent of its second-lien term loan debt, as well as with Sycamore, which will retain majority control of Belk under the plan.

Belk has received financing commitments for $225 million in new capital from Sycamore as well as investment firms KKR and Blackstone Credit, and certain existing first-lien term lenders. Members of an ad hoc crossover lender group led by KKR Credit and Blackstone Credit and other participating lenders will acquire a minority stake in Belk.

Aside from shoring up the balance sheet, the infusion of capital is expected to support Belk’s investments in strategic initiatives, including building up omnichannel shopping experiences and expanding home goods, outdoor and wellness. Those categories have done well due to changing lifestyles and needs during the pandemic.

“Belk has a 130-year legacy of providing quality products at great prices,” said Lisa Harper, chief executive officer of Belk, 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 New York-based Sycamore bought Belk in November 2015 for about $3 billion. The business had been owned and operated by the Belk family. The business was founded in 1888 and with its loyal following in the South managed to compete successfully against larger national chains. Pre-pandemic, there was some industry speculation about the chain’s lagging performance, which would have been compounded by the health crisis.

Sycamore significantly grew its stable of retail holdings in December when it completed its $540 million acquisition of the Ascena Retail Group, which included the Lane Bryant, Ann Taylor, Loft and Lou & Grey retail chains. It is believed that Lizanne Kindler, who had been running Sycamore’s Talbots division, was promoted to head the Ann Taylor, Loft, Lane Bryant and Lou & Grey divisions of Ascena, succeeding Gary Muto, who held the role of CEO of Ascena, but left the company.

Sycamore also owns Hot Topic and The Limited, among other investments.