Belk’s top lenders, including KKR, looking to avoid taking department store through bankruptcy, WSJ says

SOURCE:  CNBC
By: Lauren Thomas
KEY POINTS
  • KKR and other major lenders to Belk are in talks with the department store chain to keep it out of bankruptcy, according to a Wall Street Journal report.
  • The company, its lenders and the private equity firm Sycamore Partners are inching closer toward reaching an out-of-court deal, the report said, citing people familiar with the discussions.
  • A deal is not guaranteed at this point, the Journal report cautioned, but it said Belk’s lenders have noted how the Chapter 11 bankruptcy process has proved difficult for a number of other retail chains during the Covid pandemic.
Belk department store
Belk department store
John Greim | LightRocket | Getty Images

KKR, Blackstone and other major lenders to Belk are in talks with the North Carolina-based department store chain to keep it out of bankruptcy, according to a Wall Street Journal report.

The company, its lenders and the private-equity firm Sycamore Partners are inching closer toward reaching an out-of-court deal, the report said, citing people familiar with the discussions.

Belk did not immediately respond to CNBC’s request for comment. KKR, Blackstone and Sycamore declined to comment.

A deal is not guaranteed at this point, the Journal report cautioned, but it said Belk’s lenders have noted how the Chapter 11 bankruptcy process has proved difficult for a number of other retail chains during the Covid pandemic, with some being forced to liquidate.

KKR and Blackstone are hoping to convert a portion of Belk’s $2.6 billion debt into equity, possibly through an out-of-court deal that would allow Sycamore to retain an ownership stake, the Journal said. KKR is “reluctant” to take Belk through an in-court bankruptcy process because of the high fees associated with filing, the report said.

America’s department store operators — including Belk and its nearly 300 stores primarily in the Southeast — have struggled as consumers are frequenting malls less often and are buying less apparel during the pandemic.

Last year, Neiman Marcus, J.C. Penney, Stage Stores and Lord & Taylor filed for bankruptcy. The latter, the oldest department store chain in the nation, ended up liquidating and closing all of its stores. Penney narrowly escaped that same outcome after U.S. mall owners Simon Property Group and Brookfield Property Partners acquired it.

Sycamore recently purchased the Ann Taylor, Loft and Lane Bryant women’s apparel brands out of bankruptcy from Ascena Retail Group. The private equity firm also owns Staples, which last week made an unsolicited takeover offer for Office Depot parent ODP.

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