S&P Global downgrades Bon-Ton following delay of $14 million debt payment

S&P believes delay indicates company is headed for debt restructuring or bankruptcy

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S&P Global has downgraded The Bon-Ton Stores Inc.’s corporate credit rating following the struggling retailer’s request last week to delay making a $14 million debt payment.

The Bon-Ton Stores Inc. headquarters in downtown Milwaukee.

Milwaukee and York, Pennsylvania-based Bon-Ton exercised a 30-day grace period to postpone making an interest payment on a loan due Dec. 15, according to a Dec. 18 SEC filing.

S&P Global analysts believe the delay is an indication the company is headed toward debt restructuring or possible bankruptcy.

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“We believe there is a high likelihood that the company will not make the interest payment in full within the stated grace period,” according to a report released by S&P Global.  “We think the company did not make the interest payment to preserve shrinking liquidity and a restructuring, either out of court or through a court reorganization, is likely in the near future.”

Bon-Ton spokeswoman Christine Hojnacki said the company has sufficient cash to fund normal operations and meet financial commitments and obligations to vendors.

“The exercise of the grace period has no impact on Bon-Ton’s ability to continue to borrow under our current credit facility, Hojnacki said. “As we have communicated recently, we are taking steps to drive improved performance and strengthen our financial position. We believe it is in the best interests of Bon-Ton and our stakeholders to take advantage of the grace period under the terms of our credit agreement to continue engaging with our lenders to establish a sustainable capital structure and position Bon-Ton for long-term success. Most importantly, we are operating the business as usual across our stores and we continue to deliver an exceptional shopping experience for customers.”

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The Bon-Ton Stores Inc. has not turned an annual profit since 2010.

The retailer operates 260 department stores in 24 states under the Bon-Ton, Bergner’s, Boston Store, Carson’s, Elder-Beerman, Herberger’s and Younkers brands. As of the end of last year the company had 267 stores. In November, Bon-Ton announced it would close at least 40 stores through 2018.

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