Over the weekend, troubled department store chain The Bon-Ton Stores Inc. (OTCQX: BONT) applied for a court-supervised monetary restructuring under Chapter 11 of the United States personal bankruptcy code. The merchant stated it prepares to utilize the procedure to continue considering its choices, including a sale of the company or its properties.
The relocation was anticipated after the company formerly revealed plans to close 47 stores in 2018. Bon-Ton said it has received a dedication from its existing asset-backed loan providers for approximately $725 million in debtor-in-possession (DIP) funding.
With corporate headquarters in York, PA and Milwaukee, the retailer runs 256 stores, that includes nine furniture galleries and 4 clearance centers, in 23 states in the Northeast, Midwest and upper Great Plains incorporating roughly 24 million square feet. It runs under a number of banners: Bon-Ton, Bergner’s, Boston Shop, Carson’s, Elder-Beerman, Herberger’s and Younkers nameplates. It owns 22 of its stores.
“Bon-Ton, with a substantial geographic operating footprint and operating existence, depends on shop traffic, which has reduced as customers move increasingly toward online retailers,” Michael Culhane, CFO of Bon-Ton Stores, stated in the company’s personal bankruptcy filing.
In 2017, the business generated approximately $2.55 billion in total revenue and has actually been attempting to reorganize about $880 million in financial obligation. It failed to make a $14 million interest payment in December.
Last month, Moody’s Investors Service downgraded Bon-Ton Stores based on missed out on interest payment however still within a 30-day grace duration, and stated the lowered score reflects a high likelihood of default. Moody’s stated it believes Bon-Ton’s debt level is unsustainable at existing levels.
The company has significant leverage, with unadjusted debt/EBITDA expected to go beyond 10.9 times by the end of Bon-Ton’s current ; and weak protection, with EBITDA less capital expenditures expected to be insufficient to cover interest costs, Moody’s stated.
For the very first three quarters of last year, Bon-Ton published a loss of $135.4 million compared to a loss of $108.1 million for the very same duration a year earlier. Similar store sales decreased 6.6% in the period “due to unseasonably warm weather condition and the extension of soft shopping mall traffic trends,” the business reported.
More info on Bon-Ton’s store closure strategies can be discovered in our previously released story Financial obligation Load Forces More Bon-Ton Store Closures, Personal Bankruptcy an Alternative