Sycamore Is Said to Weigh Deal for Troubled Bon-Ton's Assets

(Bloomberg) -- Sycamore Partners, a private equity firm with a reputation for scooping up troubled retail operations, has held talks with distressed department-store chain Bon-Ton Stores Inc. about acquiring some of its assets, people familiar with the matter said.

Sycamore has spoken with debt-laden Bon-Ton about a potential transaction in recent weeks, said the people, who asked not to be identified because the discussions are private.

A purchase of Bon-Ton assets would extend a remarkable run of retail deals for Sycamore. As the brick-and-mortar landscape turned bleaker in recent years, co-founders Stefan Kaluzny and Peter Morrow made contrarian bets on companies including Staples Inc., Aeropostale Holdings Inc. and Nine West Holdings Inc. The firm is seeking to raise a $4 billion fund -- its largest yet -- by January, letting it invest in more ailing retailers.

Bon-Ton’s assets may also attract interest from other suitors, the people said. No final decisions have been made, and the companies may chose not to proceed with a deal, they said.

Christine Hojnacki, a spokeswoman for Bon-Ton, declined to comment, as did a representative for New York-based Sycamore.

Burdensome debt and declining mall traffic have hurt Bon-Ton, a nearly 120-year-old chain that’s concentrated in mid-Atlantic states. The conditions have prompted some of its vendors to demand letters of credit or cash on delivery, further depleting liquidity, Bloomberg News reported this month. The York, Pennsylvania-based company said on Tuesday that it amended its $880 million credit line to make more cash available for the holiday season.

Belk Deal

Sycamore has stepped in to buy deeply distressed retailers, often for bargain-basement prices. It scooped up clothier Talbots after an earlier deal at a higher price fell apart. It has used its own sourcing arm to help effect turnarounds, including at Talbots, where the firm’s investment has netted a sixfold return.

This year, a Sycamore affiliate agreed to buy bankrupt Limited Stores Co.’s intellectual property and other assets. This year’s $6.9 billion purchase of struggling office-supply chain Staples was the firm’s largest-ever deal.

Two years ago, Sycamore bought Belk Inc., a chain of department stores in the South, for about $2.7 billion in cash.

Bon-Ton Chief Executive Officer Kathryn Bufano, who joined the chain from Belk in 2014, left the company two months ago after her contract expired. William Tracy, the chain’s chief operating officer, took over as CEO.

Shuffling Bon-Ton stories in the Northeast to Belk might make sense for both companies, according to Noel Hebert of Bloomberg Intelligence. It would provide Bon-Ton with liquidity while allowing Belk to extend its footprint north along the Atlantic Coast, he said.

The credit-line amendment helped spark a rally for Bon-Ton earlier this week, but the shares have still lost half their value this year. The shares fell 13 percent to 73 cents in New York on Thursday.

The chain, which has a market value of $15.7 million, has been working with financial advisers PJT Partners Inc. and AlixPartners to explore options for dealing with its more than $1 billion debt load.

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