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Belk Plans Chapter 11 Reorg to Eliminate $450M Debt

ByVicki M. Young


The ownership of Belk department store will be shifting following a financial restructuring between private equity firm Sycamore Partners and the retailer’s lenders, which include KKR and Blackstone Credit.


Under the terms of the new restructuring support agreement, Sycamore will retain majority control of the department store company it purchased for $3 billion more than five years ago, while the lending group will acquire a minority ownership. The agreement, which garnered support from over 75 percent of its first lien term loan debt holders and 100 percent of its second lien term loan debt holders, will serve as the basis to recapitalize the business, significantly reducing debt by about $450 million. It also extends the maturities on all term loans to July 2025.


The financial restructuring will be completed through a “pre-packaged” Chapter 11 reorganization. Belk said it expects to complete the transaction by the end of February.


In addition, Belk has financing commitments from Sycamore, KKR and Blackstone Credit, as well as certain other first lien term lenders, which will acquire a minority stake in the chain.


Under the terms of the agreement, suppliers will be unimpaired, and will continue to be paid in the “ordinary course” for all goods and services provided to Belk.


“The infusion of new capital is expected to support Belk’s continued investment in strategic initiatives, including delivering a seamless omnichannel shopping experience and expanding Belk’s product offerings in Home Goods, Outdoor and Wellness,” Belk said on Tuesday.


“Like all retailers navigating COVID-19, our priority has been the safety of our associates, customers and communities. As the ongoing effects of the pandemic have continued, we’ve been assessing potential options to protect our future,” Lisa Harper, Belk CEO, said. “We’re confident that this agreement puts us on the right long-term path toward significantly reducing our debt and providing us with greater financial flexibility to meet our obligations and to continue investing in our business, including further enhancements and additions to Belk’s omnichannel capabilities.”


Rumblings began to surface about Charlotte-based Belk back in September, when it was learned that some vendors were being paid more slowly than usual. At the time, some financing factors weren’t immediately concerned, given the ongoing pandemic and the fact that many retailers were just getting back into figuring out how to “feel” their way through what a “new normal” should look like. Belk also converted some furloughs into permanent layoffs. Even that wasn’t out of the ordinary, given that other retailers were doing the same once they found that consumers weren’t likely to head back into physical stores anytime soon.


Last June, Sycamore, which declined to comment, was interested in acquiring bankrupt J.C. Penney, although the retail operations of the mass merchant ultimately were sold to Simon Property Group and Brookfield Asset Management. Market sources at the time believed Sycamore had hoped to combine the JCPenney and Belk operations.

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