Belk Targets 24-Hour Bankruptcy With Lenders on Board

Belk Inc., the department store chain owned by Sycamore Partners, will seek to complete an upcoming reorganization in bankruptcy court in a single day, according to people with knowledge of the plans.

The retailer will file its Chapter 11 petition in the Southern District of Texas in late February, said the people, who asked not to be identified because discussions are private. Belk on Tuesday disclosed its plans to cut debt and raise new capital to continue operating, and the people said it aims to wrap up the court process by the next day.

The urgency stems from concern over business interruptions during the bankruptcy process, which can spook vendors and customers. The quick turnaround should benefit from Belk’s work in recent weeks to get lenders on board with its restructuring plan before it filed, according to the people.

Equity Stake

The company’s plans are subject to factors including judicial discretion, and elements could change.

A 24-hour turnaround in court would put Belk in rare company, alongside online retailer Fullbeauty Brands Inc. and technology company Sungard Availability Services Capital Inc., both of which completed their restructurings in under a day in 2019. A typical bankruptcy process can stretch on for months or even years.

The restructuring plan involves handing 49.9% of the company’s equity to its lenders, with parent Sycamore retaining a 50.1% stake in exchange for supplying up to $100 million of a new $225 million loan to the company, according to the people.

A representative for Sycamore and Belk declined to comment. Distressed-debt research firm Reorg earlier reported on elements of the bankruptcy’s timeline.

Bloomberg first reported Monday on plans for Charlotte, North Carolina-based Belk’s bankruptcy filing.

The remainder of the new loan is expected to come from first-lien lenders KKR & Co., Blackstone Credit and others, including those who have not yet signed on to the agreement. This lender group will have the option to provide as much as $65 million of Sycamore’s stake in the loan.

The lenders that signed on to the deal ahead of the filing will receive some additional compensation in the form of fees, the people said.

Price quotes on the first-lien debt diverged Thursday following news of the plan’s details, with the 75% of loans included in the pre-packaged plan quoted at around 44 cents and the remainder at around 39 cents, according to a person with knowledge of the prices.

The plan will allow Belk to eliminate $450 million worth of debt from its balance sheet, compensating holders with a prorated 34.9% equity stake in the company.

Under the announced agreement, which is subject to approval of the bankruptcy court, Belk’s remaining debt maturities would be extended to 2025. Suppliers will be paid in full for past and future shipments, and Belk plans to continue normal operations throughout its bankruptcy.

©2021 Bloomberg L.P.

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