Big Lots Files For Chapter 11, Enters Into Stalking Horse Bid With Nexus
Source: PitchBook, Sean Czarnecki
Photo: Big Lots
Big Lots Inc. filed Monday for Chapter 11 in the US Bankruptcy Court for the District of Delaware after entering into a stalking horse purchase agreement with an affiliate of Nexus Capital Management.
The Nexus affiliate has agreed to acquire “substantially all” of Big Lots’ assets for $620 million, “inclusive of the assumption of certain liabilities on the terms and conditions set forth” in the purchase agreement, said Jonathan Ramsden, Big Lots’ chief financial and administrative officer, in his first-day declaration filed with the court.
The stalking horse bid follows a marketing process that Big Lots conducted over the summer, where the company, assisted by financial adviser Guggenheim Securities, contacted 20 potential purchasers, with 12 executing non-disclosure agreements, Ramsden added.
Based in Columbus, Ohio, Big Lots is a discount home store chain and ecommerce operator, offering furnishings, kitchenware, pet supplies and more.
The company intends to use Chapter 11 to complete the marketing process, hoping to hold a hearing to approve bidding procedures and the stalking horse bid protections on Oct. 4, according to the first day motion. The company has proposed setting a bid deadline for Oct. 15, an auction for Oct. 18 and a sale hearing for Oct. 29.
In addition, Big Lots has secured debtor-in-possession (DIP) facilities from certain prepetition secured creditors, according to a declaration of support by Stuart Erickson, senior managing director of Guggenheim. These facilities include a $550 million superpriority asset-based term loan (ABL) and a $157.5 million superpriority senior secured ABL credit facility, the latter of which accrues interest at a rate of S+975 following entry of a final order, Erickson said.
Erickson added that once Big Lots obtains an interim order approving those DIP facilities, the company will obtain access to $25 million in new money term loan financing; following entry of a final order, the company can issue an additional $10 million in new money term loan financing.
When the company filed for bankruptcy, Big Lots had $556.1 million in total outstanding debt, including $433.6 million under its ABL due September 2027 and $122.5 million under its term loan facility due September 2027, Ramsden said.
In the years leading up to filing for Chapter 11, Big Lots suffered from various economic headwinds and company-specific factors, including increasing competition from both physical and online retailers, falling in-store foot traffic, diminishing profit margins, inflationary costs, decreasing discretionary customer spending and the November 2022 closure of its largest supplier, United Furniture Industries, Ramsden said.
Despite initiating efforts to improve operating performance, including sales leasebacks and store closures, Big Lots determined that “the only viable pathway to maintain its business as a going concern and preserve liquidity was to rationalize its footprint, close underperforming stores, and identify a purchaser for the remaining assets,” Ramsden added.
About Sean Czarnecki
Sean Czarnecki covers distressed debt for PitchBook LCD. Previously, he had stints at With Intelligence and Business Insider, covering numerous topics ranging from real estate to advertising technology.