On Feb. 24, department store chain Belk filed for Chapter 11 in Texas federal court, but emerged from the process one day later with a prepackaged reorganization that will keep most of its operations intact.
The 133-year-old Charlotte, N.C.–based chain numbers 291 stores in 16 Southeastern states. It first announced its plan to seek bankruptcy protection in late January.
Belk was able to sail through the process since its reorganization plan had already won the support of lenders holding 99% of the company’s first-lien term loans and 100% of its second-lien term loans.
The reorganization will have no impact to employees and will keep all Belk stores open, according to a company statement. It will also wipe out $450 million of debt from the company’s book and provide $225 million in new capital for growth initiatives.
In a first-day filing, chief financial officer William Langley said that while Belk had long been coping with “a challenging commercial environment” caused by the shift to online shopping, it had taken solace in its “manageable liquidity cushion and was proactively taking steps to right-size its operations and further improve the long-term health of its balance sheet.”
That was disrupted by the COVID-19 pandemic, which “wreaked havoc on all retailers, literally resulting in a complete pause of all in-person shopping,” Langley wrote. Belk’s sales fell 32% year over year from the third week of March 2020 through December 2020.
Langley argued that nonapproval of the restructuring agreement could “lead to significant disruption and uncertainty, and could potentially result in a liquidation.”
Now that it has been approved, Belk said the new cash infusion will allow the retailer to focus on e-commerce, which already generates over $1 billion in revenue.
The new agreement calls for hedge fund Sycamore Partners to retain majority control of Belk, which it purchased in 2015. The company’s new funding will come from Sycamore, as well as leading financiers KKR and Blackstone Credit, and certain of its first-lien lenders.
(Photo courtesy of Belk)
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