The rescue deal would help save some of its stores from shutting-down. — Bloomberg
Wilmington (Delaware): Bankrupt retailer Big Lots Inc has won court approval of a rescue deal to save some of its stores from shutting-down despite challenges from vendors that claimed the deal unfairly saddles them with steep losses.
Judge J. Kate Stickles said late Tuesday she’d approve a sale of the retailer to Gordon Brothers Retail Partners, which intends to transfer between 200 and 400 Big Lots stores to Variety Wholesalers Inc.
The sale may also save thousands of jobs, lawyers said Tuesday.
The deal was announced days after an earlier sale to Nexus Capital Management LP unravelled and was also at risk of falling apart following creditor backlash. Several Big Lots vendors opposed the deal because it repays lenders while leaving trade creditors with steep losses.
Big Lots has already commenced going out-of-business sales at its more than 800 remaining stores and said it would launch a total liquidation of the business if the sale wasn’t approved.
After a day-long hearing, Stickles said neither the sale to Gordon Brothers or a liquidation is ideal.
However, the sale is the best option available and maximises the value of Big Lots’ assets in order to repay creditors, Stickles said.
Under the deal, Gordon Brothers would acquire Big Lots’ assets in exchange for repaying the retailer’s Chapter 11 loan plus as much as US$17mil in unpaid rent and other fees and expenses related to the bankruptcy, according to court documents.
Vendors accused the retailer of continuing to order goods after filing Chapter 11 in September despite realising the company was unlikely to have enough cash to cover its costs.
Big Lots has incurred about US$250mil in expenses in bankruptcy, which it won’t be able to repay, creditors lawyers said Tuesday.
The retailer had no other options after the Nexus deal failed and a full liquidation would result in the loss of thousands of jobs and even worse losses for Big Lots creditors, company lawyer Adam Shpeen said.
The deal was supported by a committee representing Big Lots unsecured creditors and company lenders. — Bloomberg
