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Bon-Ton Files For Bankruptcy, Plans To Reorganize

Bon-Ton Files For Bankruptcy, Plans To Reorganize

Although the department store sector had a promising holiday season, one struggling retailer is taking drastic measures to try to complete a turnaround. Bon-Ton Stores filed for Chapter 11 bankruptcy protection amid growing debt.

Bon-Ton has $572 million in debt due in December 2018 and carries $850 million altogether, according to Moody's, with S&P Global Market Intelligence listing it as a candidate for bankruptcy this year. The retailer failed to make a $14 million interest payment to lenders in December 2017, and has not posted a profit since 2010.

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The financial hits kept coming into the holiday season, as Bon-Ton reported Q3 sales of $545.3 million, a 7.6% drop from one year ago, and a net loss of $44.9 million. Comparable store sales fell 6.6%, which the company attributed to unseasonably warm weather and poor mall traffic.

Bon-Ton is currently engaged in discussions with potential investors and its debtholders regarding the terms of a financial restructuring plan, according to a statement. The retailer intends to use this court-supervised process to explore potential strategic alternatives, which may include a sale of the company or certain of its assets as part of the reorganization.

In January, the department store named a new CFO, Michael Culhane, to oversee the company’s finances, suggesting that a bankruptcy filing had likely been in the cards beforehand. A Bloomberg article published January 12, 2018 reported that Bon-Ton’s senior creditors were pushing the chain to file for bankruptcy.

The company's stores, e-Commerce and mobile platforms under the Bon-Ton, Bergner'sBoston Store, Carson's, Elder-Beerman, Herberger's and Younkers banners are open and operating as usual. As previously announced, the company is closing 47 stores in 2018. Store closures began on Feb. 1 and will run for approximately 10 to 12 weeks.

Bon-Ton has received a commitment from its existing lenders for up to $725 million in debtor-in-possession (DIP) financing to support the restructuring process.

As part of the turnaround efforts, Bon-Ton plans to invest more in private-label brands, refreshing the overall store layout, ditching excess inventory and strengthening its e-Commerce business.

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