Big Lots Gets Court Approval for $550 Million in Bankruptcy Financing

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Brief description of the dive:

Big Lots has received temporary court approval to immediately access $550 million of its $707.5 million in available bankruptcy financing, according to court documents and a company announcement Wednesday. The company filed for Chapter 11 protection on Monday.
The financing, along with cash generated from ongoing operations, is expected to provide sufficient liquidity to continue normal operations, including paying employees and suppliers, while Big Lots navigates the bankruptcy process.
Big Lots remains open and has said it intends to continue operating after emerging from bankruptcy.

Diving Insight:

Big Lots secured $550 million in debtor-in-possession financing and an additional $157.5 million in new term loans days after filing for bankruptcy, having debt of $556.1 million.

“With today’s court relief and the support of our lenders, we look forward to moving through this process and emerging as a stronger, more efficient company, well-positioned to serve our customers,” Chief Executive Officer Bruce Thorn said in a statement Wednesday.

The retailer also filed for bankruptcy in a stalking horse deal with Nexus Capital Management. The investment firm is offering $620 million for most of Big Lots’ assets and business operations. Unless the court receives higher or better offers, Nexus and Big Lots expect to close the deal in the fourth quarter of this year. Big Lots said it expects to “emerge from this sale process under new private ownership.”

The New York Stock Exchange also said Monday that it had begun the process of delisting the company, and trading in the retailer’s shares has been suspended. Big Lots’ shares are expected to be delisted from the NYSE on Sept. 23. While the company is required to periodically disclose some financial results while in Chapter 11, the company said it does not plan to issue press releases about the results or hold quarterly conference calls while in bankruptcy. The retailer was scheduled to release its second-quarter results on Sept. 6 but has postponed the announcement.

“In recent years, Big Lots has faced challenges as record inflation and high interest rates in the wake of the pandemic have impacted consumer spending,” the company wrote in an open letter to its business partners. The company said it expects to pay suppliers in full for goods and services provided after the bankruptcy filing.

“Nexus believes in our business and our potential, and with the financial stability they provide, we will improve our long-term performance and profitability,” the company wrote in its letter. Last month, the retailer amended its credit and loan terms to allow for the closure of up to 315 stores. Big Lots also plans to use bankruptcy to further reduce its fleet of stores.

In Chapter 11, “Big Lots hopes to avoid the path of retailer 99 Cents Only Stores and furniture retailer Conn’s, which were forced to liquidate in bankruptcy,” Sarah Foss, global head of legal and restructuring at Debtwire, said in emailed comments. “Discount chains like Big Lots have struggled with a difficult trading environment this year, and Lumber Liquidators, Bob’s Stores, Joann and The RoomPlace Furniture and Mattress have also filed Chapter 11 cases this year.”