On Tuesday afternoon, Belk said it plans to file for Chapter 11 bankruptcy protection to complete a debt restructuring.
The North Carolina-based department store chain entered into a restructuring support agreement with its majority owner, Sycamore Partners, with the holders of more than 75 percent of its first-lien term loan debt and holders of 100 percent of its second-lien term loan debt to reduce its debt by approximately $450 million.
The Restructuring Support Agreement (RSA) will also extend maturities on all term loans to July 2025.
Under the terms of the RSA, Sycamore Partners will retain majority control of Belk. The retailer has received financing commitments for $225 million in new capital from Sycamore Partners, investment firms KKR and Blackstone Credit, and certain existing first-lien term lenders. Under the RSA, members of an ad hoc crossover lender group led by KKR Credit and Blackstone Credit and other participating lenders will acquire minority ownership.
Under the RSA, suppliers will be unimpaired and will continue to be paid in the ordinary course for all goods and services provided to the company.
Belk plans to continue normal operations throughout its financial restructuring process.
Customers will continue to receive access to merchandise and services when shopping at Belk’s stores and online.
The infusion of new capital will support Belk’s investment in strategic initiatives, including delivering an omnichannel shopping experience and expanding Belk’s product offerings in Home Goods, Outdoor and Wellness.
“Belk has a 130-year legacy of providing quality products at great prices,” said Lisa Harper, Belk CEO. “Like all retailers navigating COVID-19, our priority has been the safety of our associates, customers and communities. As the pandemic’s ongoing effects 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 the greater financial flexibility to meet our obligations and to continue investing in our business, including further enhancements and additions to Belk’s omnichannel capabilities.”
Belk expects to complete the financial restructuring transaction through an expedited “pre-packaged” reorganization under Chapter 11 of the U.S. Bankruptcy Code. The company expects the transaction to complete by the end of February.
Kirkland & Ellis LLP is serving as legal adviser, Lazard serves as a financial adviser and Alvarez & Marsal North America, LLC is acting as a restructuring adviser to Belk. Latham & Watkins LLP is serving as legal advisor to Sycamore Partners. Willkie Farr & Gallagher LLP is serving as legal advisor, PJT Partners LP is serving as financial advisor to the Ad Hoc Crossover Lender Group. O’Melveny & Myers LLP is serving as legal advisor and Evercore is serving as financial advisor to the Ad Hoc First Lien Lender Group.
Belk operates nearly 300 Belk stores in 16 Southeastern states.
Photo courtesy Belk