Struggling department store chain Bon-Ton Stores Inc. (OTCQX: BONT) revealed today that it has actually participated in restructuring conversations with some of its lenders after cannot make necessary interest payments last month.
The chain stated it has actually proposed a more thorough, two-year reorganization strategy with the lenders, including the decision to close or sell more of its stores.
Last November, the chain announced plans to close about 40 shops following sales decreases in the 3rd quarter.
Consisted of in that proposal, which Bon-Ton launched to its stockholders today, was that it was completing a “more stringent review” of its existing store portfolio.
Bon-Ton, with home offices in York, PA, and Milwaukee, WI, operates 260 stores, that includes nine furnishings galleries and four clearance centers, in 24 states in the Northeast, Midwest and upper Great Plains under the Bon-Ton, Bergner’s, Boston Shop, Carson’s, Elder-Beerman, Herberger’s and Younkers nameplates. Annual revenues are around $2.5 billion.
The portfolio consists of a number of poorly carrying out stores that “contribute minimal worth,” according to the company, and are siphoning working capital and management attention away from the more lucrative stores in its chain.
The retailer has been reviewing 100 of its worst-performing shops and reported as numerous as 42 stores might be closed this year; another 20 or more stores that have to be monitored for additional indications of deterioration, 3 others that could be offered.
The common element of this group of shops, the business said, are remaining in places in “passing away shopping malls and centers suffering from frustrating competitive pressures.”
The business stated it could also create approximately $4 million in rent savings from the anticipated closings throughout the remainder of its portfolio that it would maintain.
With the reduced store portfolio, the company likewise plans to think about consolidating its number of distribution centers from three to 2.
At the very same time, Bon-Ton shop said there is an opportunity to purchase new shop openings, especially in markets where Macy’s has been abandoning area. The company stated it has actually seen a significant uptick in sales in markets where Macy’s has currently closed stores.
Bon-Ton is forecasting opening 14 brand-new stores over the next 3 years.
In its continuous negotiations, Bon-Ton said it has not yet reached a contract on mutually acceptable terms with the noteholders and that there are no guarantees that it will.
Meanwhile, the retailer stated it is continuing to look for an equity sponsor as well as examining liquidation options. The company said it has already acquired liquidation bids for all its inventory. Those quotes would suffice to cover its outstanding asset-backed loan arrangements, excluding any prospective insolvency expenses.
Previously this month, Moody’s Investors Service reduced Bon-Ton Stores based on missed interest payment however still within a 30-day grace period, and stated the reduced score shows a high possibility of default. Moody’s said it believes Bon-Ton’s financial obligation level is unsustainable at current levels.
The business has substantial take advantage of, with unadjusted debt/EBITDA expected to exceed 10.9 times by the end of Bon-Ton’s existing ; and weak coverage, with EBITDA less capital investments anticipated to be inadequate to cover interest costs, Moody’s stated.
For the first three quarters of in 2015, Bon-Ton published a loss of $135.4 million compared with a loss of $108.1 million for the same duration a year earlier. Comparable store sales reduced 6.6% in the duration “due to unseasonably warm weather and the continuation of soft shopping mall traffic trends,” the business reported.
Nevertheless, the department store chain hasn’t published a revenue because 2012.