Department store chain Belk and the U.S. arm of beauty retailer L’Occitane en Provence are the latest retailers to file for Chapter 11 bankruptcy protection amid pandemic challenges.
Belk, which opened its first store in 1888, said it has entered into a restructuring support agreement with its majority owner, private equity firm Sycamore Partners, and the holders of more than 75% of its first-lien term loan debt, and holders of 100% of its second-lien term loan debt.
Belk plans to recapitalize the business, cut debt by approximately $450 million, and extend maturities on all term loans to July 2025. Under the terms, Sycamore Partners will retain majority control of Belk.
"Belk has a 130-year legacy of providing quality products at great prices," said Belk CEO Lisa Harper. "Like all retailers navigating COVID-19, our priority has been the safety of our associates, customers and communities. As the ongoing effects of the pandemic have continued, we've been assessing potential options to protect our future. We're confident that this agreement puts us on the right long-term path toward significantly reducing our debt and providing us with greater financial flexibility to meet our obligations and to continue investing in our business, including further enhancements and additions to Belk's omnichannel capabilities."
Belk expects to complete the financial restructuring transaction through an expedited "pre-packaged" reorganization under Chapter 11 of the U.S. Bankruptcy Code and be done by the end of February.
L'Occitane has also filed for Chapter 11 bankruptcy protection, as the beauty retailer looks to cut costs and create a sustainable U.S. store platform.
To implement this store footprint optimization plan, the retailer commenced a voluntary case under Chapter 11. The filing does not include the L’Occitane en Provence brand or any operations outside the U.S.; parent company L’Occitane International S.A.; or any other group subsidiaries.
L'Occitane said its business continues to be impacted by disproportionately high store rent obligations. The company determined that a Chapter 11 process was the necessary path to right-size its brick-and-mortar presence following repeated endeavors to engage with its landlords to address unmanageable store lease terms.
"Today's action is a pivotal step forward in achieving the full potential of L'Occitane's U.S. business," said Yann Tanini, managing director of L'Occitane North America. "Over the past year, we have moved aggressively to address COVID-related challenges head on, developing innovative new ways to connect with our community and continue to deliver the extraordinary L'Occitane beauty experience that our customers know and love, all while accelerating the essential transformation of our store footprint already underway. We look forward to working collaboratively with our landlords to achieve partnerships that make economic sense in this current retail environment and best position our marquee brand's boutique offering for years to come."
The retailer said it has ample liquidity to support ongoing operations across all channels and fulfill commitments to its valued employees, customers, and suppliers in the ordinary course during the restructuring of its U.S. store lease portfolio, which it anticipates completing in short order.
The company has filed with the Court a series of customary motions seeking to continue operating its business as usual, allowing for ongoing engagement with customers in-store, online, and through L'Occitane's clienteling applications.
These "first day" motions include requests to continue to pay wages and provide benefits to employees as usual, honor all gift cards in the normal course, and maintain customer policies. The company intends to continue to pay suppliers in the ordinary course for all goods received and services rendered after the filing.