SC retail stalwart Belk Inc. renegotiates its debt — again | Business

Senior executives set the wheels in motion for a possible sale a decade ago, as they plotted out a growth plan while keeping in mind the myriad mounting competitive pressures. They began informally exploring “strategic alternatives” to “maximize shareholder value,” according to a synopsis of their thinking.

Belk at that time was pulling in $4 billion in annual revenue from its roughly 300 locations in 16 states, making it the largest privately held department store chain in the country. Management looked at making acquisitions, going public and putting the company on the block.

By 2015, Belk was seeking out prospective acquirers with a retail track record and the financial firepower to pull off the deal.

Just one bidder was still standing when when the deadline for formal offers rolled around: Sycamore Partners, which was known for buying stakes mostly in specialty chains, such as Nine West, Jones New York and Talbots.

Belk would become the first full-service department store acquisition for its new “equity sponsor” — and, at $3 billion, its biggest buyout up to that time.

The sale was finalized in December 2015, in the thick of the holiday sales season. Belk said the deal would ensure its “future in our increasingly competitive and changing industry landscape.”

But the buyout also loaded the chain with more than $2 billion in debt just as major department stores were losing business to smaller specialty stores and online merchants. The industry’s troubles escalated in early 2021, when the pandemic forced many brick-and-mortar retailers to shut down for weeks, decimated apparel sales and turned shopping malls into ghost towns.

Belk, citing a “drastic decline in sales” during the health crisis and other financial challenges, took a speedy one-day trip through the bankruptcy system in February 2021, after negotiating agreements with all of its major creditors.

The lenders that signed off on the “prepackaged” reorganization in exchange for minority ownership stakes included the investment giant KKR. Under last week’s privately negotiated restructuring, the longtime buyout firm displaced Sycamore Partners as one of the two new controlling shareholders, along with Hein Park Capital Management.