[Editor’s Note: In a statement released after this story was published, Belk announced that it had successfully completed its one-day restructuring and exited Chapter 11 bankruptcy.]
133-year-old department store chain Belk has formally filed for bankruptcy after announcing plans two weeks ago for an expedited “one-day reorganization.” In the court filing, the retailer cited the COVID-19 pandemic and “general market-related challenges” as primary catalysts of its recent decline.
The reorganization plan, approved by a Houston bankruptcy court on Feb. 23, will see Belk continue normal operations at its 291 stores and online throughout the restructuring process. The retailer also said it would continue to pay all suppliers for goods and services as scheduled.
Earlier this month, lenders holding 99% of Belk’s first lien term loan and 100% of its second lien term loan entered into a Restructuring Support Agreement, giving “near unanimous” support for the plan, according to a statement from Belk.
Sycamore Partners — which recently faced scrutiny for its bankruptcy plan for Ascena Retail Group — will retain majority control of the department store, and has committed $225 million in new capital. Belk is hoping that capital, combined with a debt reduction of approximately $450 million and extended maturities on all term loans to July 2025, will be enough for a hasty exit from bankruptcy.
“A prolonged stay in Chapter 11 will not only jeopardize the value-maximizing restructuring, but will also put the entire enterprise at significant risk, which could result in the loss of approximately 17,000 jobs and the closing of 291 stores,” according to the court documents.
So far, the retailer is on track for a quick journey through bankruptcy, over the objection of the Department of Justice trustee appointed to the case, Kevin Epstein.
“The debtors seek to confirm a plan within hours of filing for bankruptcy, which would enable them to race through Chapter 11 too quickly and deprive parties-in-interest, governmental agencies and the court sufficient time to evaluate — let alone respond or object to — the plan,” said Epstein in a court filing. “The debtors here want to have their cake and eat it too by foisting obligations onto others before shouldering the responsibilities held by Court-supervised debtors-in-possession.”