Belk to Cut $450 Million of Debt With Record-Breaking Speed (3)

Belk Inc., the department store chain owned by Sycamore Partners, won court approval of its plan to slash $450 million of debt less than one day after filing for Chapter 11 bankruptcy.

U.S. Bankruptcy Judge Marvin Isgur said in a hearing Wednesday he would approve the retailer’s bankruptcy plan, paving the way for Belk to emerge from Chapter 11. If the Charlotte, North Carolina-based company exits court protection this afternoon as planned, the case would be the fastest ever pre-packaged bankruptcy, Matthew Fagen of law firm Kirkland & Ellis said on behalf of the company.

The southeastern retailer, which filed for court protection in Houston, entered bankruptcy after developing a restructuring plan that was pre-approved by a majority of its debt holders. It listed assets and liabilities of between $1 billion and $10 billion each in its petition.

A Belk store in Alabama in March 2020.

Photographer: Michael Wade/con Sportswire/AP Images

Belk’s plan cuts its debt and provides $225 million of new capital from Sycamore and other lenders. Bloomberg on Jan. 25 reported Belk was preparing the Chapter 11 filing.

Read more: Belk department store chain said to plan bankruptcy to tame debt

The new capital comprises a loan backstopped by lenders including Davidson Kempner Capital Management and Hein Park Capital Management, according to documents filed with claims agent Prime Clerk. The lenders will receive $12 million in fees in exchange for their pledge to provide $125 million of the loan as a backstop.

“Belk will have ample time to grow into its capital structure going forward,” Fagen said, adding that the retailer will be left with about $1.46 billion of debt when it exits bankruptcy.

Fagen said that at the time of the bankruptcy filing, Belk was “running on fumes,” with $7 million of available cash.

Department store chains have been suffering from a years-long decline as shoppers shifted to more specialized or novel merchants. Last year, J.C. Penney Co. and Neiman Marcus Group Inc. filed for bankruptcy.

William Henry Belk opened his first store, called The New York Racket, in 1888. The mid-priced chain bought up other department store chains along the way growing to almost 300 locations in 16 states, mostly in the South. Sycamore, a private equity firm, bought Belk in 2015.

The case is Belk Inc., 21-30630, U.S. Bankruptcy Court for the Southern District of Texas

(Adds approval of plan in first paragraph, record-setting speed in second.)

To contact the reporters on this story:
Eliza Ronalds-Hannon in New York at eronaldshann@bloomberg.net;
Jeremy Hill in New York at jhill273@bloomberg.net

To contact the editors responsible for this story:
Claire Boston at cboston6@bloomberg.net

Dawn McCarty, Nicole Bullock

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