Bon-Ton taps AlixPartners to advise on turnaround efforts

09 October 2017 Consultancy.uk

Bon-Ton has hired consulting firm AlixPartners to provide operational advice regarding its turnaround efforts, while restructuring advisory PJT consider refinancing of the company’s debts. The beleaguered bricks and mortar retailer is also reported to be interviewing banks to appoint an advisor to review strategic options including debt restructuring, as digital disruptors such as Amazon continue to draw consumers away from traditional avenues of spending.

Bon-Ton Stores is one of the largest regional department store chains in the US, operating about 260 stores primarily in the Northeast and Midwest of the country, under the names Bon-Ton, Bergner’s, Boston Store, Carson’s, Elder-Beerman, Herberger’s and Younkers. The company confirmed a new CEO in September, with William Tracy, the company’s former chief operating officer, taking the reigns as Bon-Ton faces the possibility of bankruptcy. In the face of growing competition, the group has been trapped between digital innovators like Amazon eating into its market share, and hard-discounters such as Lidl and Aldi, who continue to ramp up their presence in Bon-Ton’s territories.

Bon-Ton store

The American retailer has subsequently been facing significant sales declines. At the end of Q2 2017, Bon-Ton reportedly had $856 million in long-term debt, while holding $6 million in cash, putting its net debt at around $850 million. The company is currently maintaining its earnings before interest, taxes, depreciation, and amortisation (EBITDA) at around the same levels via stringent cost cutting measures, while it weighs up how best to pursue a portion of the online shopping market. It has also been offering products made in the local communities surrounding its stores in a program called “Close to Home.”

Despite these efforts, in September, The Wall Street Journal cited unidentified sources, claiming Bon-Ton had hired the restructuring firm PJT Partners to consider how the retailer could refinance debt and prepare for a possible bankruptcy filing. A portion of the company’s revolving credit facility expires next year, and Bon-Ton’s market capitalisation is just $15 million. The department store operator’s debt is meanwhile trading well beneath its face value, which indicates investor concerns regarding its ability to make a full repayment. The company’s $350 million in collateral-backed bonds maturing in 2021 were trading at about 38 cents to a dollar on Thursday.

While global advisory-focused investment bank PJT was drafted in to focus on refinancing of debt and bankruptcy preparations however, Bon-Ton also brought on board AlixPartners, with the firm selected to spearhead efforts to revamp its operations. AlixPartners has advised several retailers in financial distress, including fashion house BCBG Max Azria Group, which filed for bankruptcy in February, along with being selected by the Croatian government to advise the ailing food-group Agrokor – which represents 15% of Croatia’s GDP – with restructuring.

Related: With less crisis around, demand for chief restructuring officers stablises.

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