TSL Express Daily News

Bankrupt retailer Big Lots Inc. no longer anticipates it can complete its asset sale to private equity firm Nexus Capital Management LP and will commence the sale of its stores in coming days to protect the value of its real estate.

The discount chain that employs more than 27,000 people said in a statement Thursday it continues to look for another way to stay in business through a transaction it would look to complete by the end of January if a deal can be struck.

“We all have worked extremely hard and have taken every step to complete a going concern sale,” Bruce Thorn, Big Lots’ president and chief executive officer said. “While we remain hopeful that we can close an alternative going concern transaction, in order to protect the value of the Big Lots estate, we have made the difficult decision to begin the GOB process.”

The announcement comes as a valuation appraisal of the company’s inventory was lower than expected, making the economics of the sale to Nexus no longer viable, according to people with knowledge of the matter who asked not to be identified discussing a private matter. At the same time, landlords had pressured the company in court to explain why it hadn’t closed the deal with Nexus, which agreed to buy the company after it filed for Chapter 11 in September.

An official committee of unsecured creditors on Monday had asked in court that the company either pay tens of millions of dollars in back rent, or be liquidated by a court-approved trustee.

Shuttering Stores

Big Lots will begin going-out-of-business sales at about 870 stores, company attorney Brian M. Resnick said during a hearing Thursday in front of US Bankruptcy Judge J. Kate Stickles.

The company is still talking to Nexus and another firm about saving “several hundred” stores instead of the entire group Nexus had originally agreed to take over, Resnick said. That long-shot effort would have to come together “in a couple of weeks,” Resnick added.

There is very little time to get a new deal, according to Stickles. “This is what I would characterize as a melting ice cube,” she said.

A representative for Guggenheim Partners, which is advising the company, declined to comment. Representatives from Big Lots, Nexus, as well as Kirkland & Ellis, which is advising Nexus, and the company’s legal counsel Davis Polk & Wardwell, did not return messages seeking comment.

Limited Cash

Landlords, vendors who supply inventory to the stores and other creditors told Stickles they are concerned about how Big Lots will decide who gets paid with the limited amount of cash the company has left.

At least one group of landlords is convinced that Big Lots doesn’t have enough money to pay the current costs of its bankruptcy, which includes not only attorney fees, but for inventory and some rent. Such administrative costs are normally given first claim on a bankrupt company’s cash.

“To a certain extent we were the canary in the coal mine with our motion for a status conference,” said landlord attorney Ivan Gold, referring to his demand earlier this week that Big Lots come to court and explain to the judge why the Nexus sale had failed to close.

Columbus, Ohio-based Big Lots has suffered from declining sales for years, including in recent quarters, as rising inflation squeezed the wallets of its budget-conscious shoppers. Other retailers, including Conn’s Inc. and LL Flooring Holdings Inc., have come under strain amid a slowdown in home spending.

Party City Holdco Inc. is planning to file for bankruptcy possibly within the next two weeks, in a process that may lead to the liquidation of its stores, Bloomberg reported. Container Store Group Inc. is also preparing to file for bankruptcy in the coming weeks following mounting losses and escalating liquidity woes, Bloomberg also reported earlier this month.

Last month, Stickles approved the sale, but with the understanding that certain conditions had to be met before the deal could close. Those conditions included that the buyer receive a debt commitment letter related to the deal’s financing and that Big Lots certify the value of certain assets it is contributing to the deal, according to the purchase agreement.

The case is Big Lots Inc., number 24-11967, in the US Bankruptcy Court for the District of Delaware.