Bon-Ton’s future in the hands of its debtholders

Company receives court approval to continue operation through restructuring process

Bon-Ton
Bon-Ton will liquidate.

The future of Bon-Ton is in the hands of its dozens of debtholders, according to a national retail analyst.

The company, which filed for chapter 11 bankruptcy protection on Sunday after months of speculation, is currently engaging with potential investors and debt holders on a financial restructuring plan.

Bon-Ton
The future of Bon-Ton should be known within two months.

Bon-Ton, the parent company of Boston Store, reported having $1.74 billion in debts and $1.59 billion in assets as of Oct. 28. The company also reported millions in outstanding trade debts to suppliers. The Milwaukee and York, Pennsylvania-based company has not had a profitable year since 2010.

“This has been a grind for Bon-Ton and no one has any clear insight how this will play out because the debtholders hold all of the cards at this point,” said Manus Clancy, senior managing director of applied data, research and pricing with New York-based TreppWire.

“The $1.7 billion that is owed is water under the bridge,” Clancy said. “That money is already spent. If you are the debtholder, you want to know the plan to establish a capital structure.”

On Jan. 29, Bon-Ton unveiled a three-year turnaround plan that included closing nearly 50 stores, including the Boston Store Clearance Center on South 27th Street in Milwaukee, and focusing more on e-commerce sales.

The company could also renegotiate lease deals to pay off debt, Clancy said.

In September, Bon-Ton entered into an agreement for an $18.9 million sale-leaseback deal for its Herberger’s store in Roseville, Minnesota. However, an analyst report at the time concluded that unlike Bon-Ton’s competitors, the company has a modest amount of real estate assets.

“At the end of 2016, Bon-Ton only owned 25 stores and one distribution center and had ground leases for another seven stores,” according to the report. “It also apparently had pledged 18 of those owned stores as collateral for its credit facility debt.”

Clancy said Bon-Ton could end up going the way of Sports Authority, which filed for chapter 11 bankruptcy in March 2016 and attempted to renegotiate leases on its stores but ultimately liquidated its assets and closed all of its stores in May 2016.

“Someone ultimately has to finance this,” Clancy said. “Someone who owns their stock, or their debt. Those entities have to make a decision. And sometimes the best decision is to liquidate.”

On Tuesday, the U.S. Bankruptcy Court for the District of Delaware approved all of Bon-Ton’s first day motions related to its bankruptcy filing. The approval will enable Bon-Ton to meet its financial obligations throughout the financial restructuring process including paying its employees and keeping the stores open.

“Across our seven well-loved brands, we continue to deliver the exceptional shopping experience customers expect in our stores and across e-commerce and mobile platforms,” said Bill Tracy, Bon-Ton’s CEO. “I want to thank our associates for their ongoing hard work and dedication to our customers as we move through this process.”

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