Major land sale to Nexus Falls Apart, plans to close store

(Bloomberg) — Bankrupt retailer Big Lots Inc. no longer expects to complete the sale of its assets to private equity firm Nexus Capital Management LP and will begin selling its stores in the coming days to to protect the value of its real estate.

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

“We have all worked extremely hard and taken every step to complete a going concern sale,” said Bruce Thorn, President and CEO of Big Lots. “While we remain hopeful that we can complete an alternative going concern transaction, in order to protect the value of the Big Lots property, we have made the difficult decision to initiate the GOB process.”

The announcement comes at a time when the valuation of the company’s inventory has been lower than expected, making the sale to Nexus no longer commercially viable, according to people with knowledge of the matter who spoke on condition of anonymity to discuss a private matter. At the same time, landlords had pressured the company in court to explain why it didn’t close the deal with Nexus, which agreed to buy the company after it filed for Chapter 11 in September.

An official committee of unsecured creditors went to court on Monday to demand that the company either pay tens of millions of euros in rent arrears or be liquidated by a court-approved trustee.

shutters

Big Lots will begin ceasing sales at about 870 stores, company attorney Brian M. Resnick said during a hearing Thursday before U.S. Bankruptcy Judge J. Kate Stickles.

The company is still negotiating with Nexus and another company to rescue “several hundred” stores instead of the entire group that Nexus originally agreed to acquire, Resnick said. That long-term effort would have to come together “in a few weeks,” Resnick added.

According to Stickles, there is very little time left to strike a new deal. “I would describe that as a melting ice cube,” she said.

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

Limited cash

Landlords, vendors who supply the stores with inventory and other creditors told Stickles they were concerned about how Big Lots would decide who would be paid with the limited amount of cash the company had left.

At least one group of landlords believes Big Lots doesn’t have enough money to pay ongoing bankruptcy costs, which include not only legal fees but also the cost of inventory and some rent. Such administrative costs are usually initially levied on the cash reserves of an insolvent company.

“In a sense, we were the canary in the coal mine with our request 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 The sale had taken place and had not been able to close.

Big Lots, based in Columbus, Ohio, has suffered from declining sales for years, including in recent quarters, as rising inflation hit the wallets of its price-conscious shoppers. Other retailers, including Conn’s Inc. and LL Flooring Holdings Inc., are coming under pressure due to a decline in real estate spending.

Bloomberg reported that Party City Holdco Inc. plans to file for bankruptcy, possibly within the next two weeks, which could lead to the liquidation of its stores. Container Store Group Inc. is also preparing to file for bankruptcy in the coming weeks after mounting losses and escalating liquidity problems, Bloomberg also reported earlier this month.

Last month, Stickles agreed to the sale, but with the understanding that certain conditions had to be met before the deal could be completed. Those conditions included that the buyer receive a letter of indenture related to the financing of the deal and that Big Lots certify the value of certain assets it is contributing to the deal pursuant to the purchase agreement.

The case is Big Lots Inc., No. 24-11967, in the United States Bankruptcy Court for the District of Delaware.

(Updates to add details from December 19 hearing.)

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Major land sale to Nexus Falls Apart, plans to close store

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