Big Lots enters bankruptcy protection

November 2024 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

November 2024 Issue

In September, discount retailer Big Lots Inc filed for Chapter 11 bankruptcy protection from its debts, citing inflation and high interest rates as hurting its business.

The company also announced it had entered into a sale agreement with an affiliate of Nexus Capital Management LP to acquire substantially all of the company’s assets and operations. To enable this transition, Big Lots and its subsidiaries filed for Chapter 11 bankruptcy in the US Bankruptcy Court for the District of Delaware.

Despite the restructuring, Big Lots will continue to serve customers in-store and online. However, as part of the court-supervised sale process, the company will continue to assess its operational footprint, which will include closing additional store locations. Big Lots will also continue to evaluate and optimise its distribution centre model going forward.

To facilitate the Chapter 11 process, Big Lots has secured commitments for $707.5m of financing, including $35m in new funding from some of its current lenders. If approved by the bankruptcy court, the financing is expected to provide sufficient liquidity to support the company while it works to complete the sale to Nexus Capital. The chain also received a delisting notice from the New York Stock Exchange because the average closing price of its shares was below $1 over a consecutive 30 trading-day period.

Under the terms of the sale agreement, Nexus will serve as the ‘stalking horse’ bidder in a court-supervised auction process pursuant to section 363 of the US Bankruptcy Code. Accordingly, the proposed transaction is subject to higher or otherwise better offers, court approval and other conditions. Under the sale agreement, if Nexus is deemed the winning bidder, the parties anticipate closing the transaction during the fourth quarter of 2024.

“We are proud of the work we do every day across Big Lots to provide our customers with unmistakable value and exceptional savings, as well as building stronger communities through our philanthropic efforts,” said Bruce Thorn, president and chief executive of Big Lots. “The actions we are taking today will enable us to move forward with new owners who believe in our business and provide financial stability, while we optimize our operational footprint, accelerate improvement in our performance, and deliver on our promise to be the leader in extreme value.

“We appreciate the tremendous loyalty of our customers, and our core purpose of helping them ‘Live BIG and Save LOTS’ has never been stronger,” he continued. “As we move through this process, we remain committed to offering extreme bargains, enabling easy shopping in our stores and online, and providing an outstanding customer experience. We are grateful for the hard work and dedication of our associates who remain focused on delivering the best service possible for our valued customers, and we deeply appreciate the partnership of our vendors as we start a new chapter for our business.”

“We are excited to have the opportunity to partner with Big Lots and help return this iconic brand to its status as America’s leading extreme value retailer,” said Evan Glucoft, managing director of Nexus. “The Big Lots business has incredible potential and we are confident that its greatest days are ahead.”

Big Lots cited a number of economic factors for its bankruptcy, including high inflation and interest rates, which have caused customers to change their purchasing behaviours. Amid these financial difficulties, the company has already begun the process of closing roughly 300 of its 1400 stores across the US.

“The prevailing economic trends have been particularly challenging to Big Lots, as its core customers curbed their discretionary spending on the home and seasonal product categories that represent a significant portion of the company’s revenue,” the company noted in a statement announcing the filing.

Big Lots is the latest in a series of well-known retailers to encounter financial turbulence as customers cut back spending on non-essential items.

Richard Summerfield