Bon-Ton Creditors Said to Propose Bankruptcy Within Weeks

(Bloomberg) -- Senior creditors of Bon-Ton Stores Inc. are pushing the troubled retailer to file for bankruptcy, a development that could happen as soon as this month, according to people familiar with the matter.

Bon-Ton, however, hasn’t made a decision and is still trying to avoid a court filing, said the people, who asked not to be identified because the information isn’t public. If the company does enter bankruptcy, it’s not clear whether it would seek to liquidate or to reorganize, the people said.

One restructuring option -- which would involve an eventual bankruptcy -- could include combining some parts of the retailer with another business, one of the people said.

The York, Pennsylvania-based company has been coping with declining mall traffic, management upheaval and about $1.2 billion in debt. Those difficulties prompted some vendors to demand letters of credit or cash on delivery, further draining its liquidity, Bloomberg reported last year.

The creditor group has retained Miller Buckfire & Co. as financial adviser and Jones Day for legal advice, the people said. Representatives for Bon-Ton, Miller Buckfire and Jones Day didn’t respond to requests for comment.

Bon-Ton’s thinly traded 2021 notes slipped to 20.5 cents on the dollar at midday in New York, according to Trace data. They were quoted as low as 16.35 cents during the session, matching their all-time low.

Sinking Sales

Last month, the company invoked a 30-day grace period to make a $14 million interest payment, a term that expires next week. And while retailers count on the holiday season to revive their fortunes, Bon-Ton reported earlier this week that comparable-store sales, a key gauge of performance, fell 2.9 percent in the period. The company is “actively engaged in discussions” with debt holders, Chief Executive Officer Bill Tracy said in the statement.

The lender group pressuring the company includes Brigade Capital Management, B. Riley Financial Inc., Riva Ridge Capital Management, Waddell & Reed and Wolverine Asset Management, said the people with knowledge of the situation. The group owns at least two-thirds of the retailer’s $350 million second-lien bond, the people said. Bank of America Corp. and other lenders of the company’s first-lien asset-based revolving loans are also involved in the discussions, the people said.

Advisory Help

The chain has been working for several months with financial advisers PJT Partners Inc. and AlixPartners to explore options for dealing with its debt load. Bon-Ton is also being advised by law firm Paul Weiss Rifkind Wharton & Garrison LLP, the people said.

Company representatives declined to comment or didn’t respond to requests for comment.

Shares of Bon-Ton fell as much as 3.3 percent to 29 cents on Friday. That’s down from a post-recession peak of more than $22 in 2013.

While the recent holiday sales decline was less severe than in the previous year, the results contrasted with an overall robust holiday season. Spending in November and December rose 5.5 percent, the most since 2010, the National Retail Federation said Friday.

Bon-Ton has previously disclosed plans to close at least 40 of its 260 stores.

The chain earlier garnered attention from Sycamore Partners. The private equity firm, which has a reputation for scooping up troubled retailers, has held talks about a possible acquisition of some of the department store’s assets, Bloomberg reported in October. Sycamore also operates Belk, another department-store chain.

To contact the reporters on this story: Laura J. Keller in New York at lkeller22@bloomberg.net, Lauren Coleman-Lochner in New York at llochner@bloomberg.net.

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Jonathan Roeder

©2018 Bloomberg L.P.