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Bon-Ton Files for Ch. 11 Bankruptcy Reorganization

Retailer to Explore Options Including Sale of Company or its Assets
February 5, 2018
Over the weekend, troubled department store chain The Bon-Ton Stores Inc. (OTCQX: BONT) filed for a court-supervised financial restructuring under Chapter 11 of the U.S. bankruptcy code. The retailer said it plans to use the process to continue considering its options, including a sale of the company or its assets.

The move was expected after the company previously announced plans to close 47 stores in 2018. Bon-Ton said it has received a commitment from its existing asset-backed lenders for up to $725 million in debtor-in-possession (DIP) financing.

With corporate headquarters in York, PA and Milwaukee, the retailer operates 256 stores, which includes nine furniture galleries and four clearance centers, in 23 states in the Northeast, Midwest and upper Great Plains encompassing approximately 24 million square feet. It operates under several banners: Bon-Ton, Bergner's, Boston Store, Carson's, Elder-Beerman, Herberger's and Younkers nameplates. It owns 22 of its stores.

"Bon-Ton, with a significant geographic operating footprint and operating presence, is dependent on store traffic, which has decreased as customers shift increasingly toward online retailers," Michael Culhane, CFO of Bon-Ton Stores, said in the company's bankruptcy filing.

In 2017, the company generated approximately $2.55 billion in total revenue and has been trying to restructure about $880 million in debt. It failed to make a $14 million interest payment in December.

Last month, Moody's Investors Service downgraded Bon-Ton Stores based on missed interest payment but still within a 30-day grace period, and said the lowered rating reflects a high likelihood of default. Moody's said it believes Bon-Ton's debt level is unsustainable at current levels.

The company has significant leverage, with unadjusted debt/EBITDA expected to exceed 10.9 times by the end of Bon-Ton's current fiscal year; and weak coverage, with EBITDA less capital expenditures expected to be insufficient to cover interest costs, Moody's said.

For the first three quarters of last year, Bon-Ton posted a loss of $135.4 million compared to a loss of $108.1 million for the same period a year earlier. Comparable store sales decreased 6.6% in the period "due to unseasonably warm weather and the continuation of soft mall traffic trends," the company reported.

More information on Bon-Ton's store closure plans can be found in our previously published storyDebt Load Forces More Bon-Ton Store Closures, Bankruptcy an Option

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