Bon-Ton Bankruptcy Looming? Company Enters into Forbearance Agreement, Shares Crater

Bon-Ton Bankruptcy
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The Bon-Ton Stores, Inc. (OTCMKTS:BONT) is on shaky ground; it’s shuttering stores, its share price has crashed, and creditors are pushing the company to file for bankruptcy. Anonymous sources say the filing could happen as soon as next month. Could we see a Bon-Ton bankruptcy?

While Bon-Ton is trying its best to avoid filing for bankruptcy, if it can’t, it’s not clear whether the York, Pennsylvania-based department store will seek liquidation or reorganization.

To that end, on January 16, 2018, Bon-Ton announced that it had entered into an ABL forbearance agreement with its credit lenders after failing to make a $14.0-million interest payment that was due December 15. Instead, Bon-Ton decided to take a 30-day grace period, which has officially ended.

The forbearance agreement will expire on January 26 unless further extended by the parties.  The forbearance period under the ABL forbearance agreement will be automatically extended to February 4.

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Investors did not respond kindly to the news. Shares of Bon-Ton (which trades Over-The-Counter) are, as of January 17, trading at $0.20, a 42% drop since the start of 2018.

A year ago, Bon-Ton was trading around $1.30 per share. At the start of 2014, Bon-Ton was trading near $16.00 per share. It’s been all downhill since then.

Bon-Ton operates 260 stores in 24 states in the Northwest Midwest and upper Great Plains under the Bon-Ton, Boston Store, Bergner’s, Carson’s, Elder-Beerman, Herberger’s and Younkers nameplates. The company, like many physical retailers, has struggled over the years to adapt to the changing retail environment, as consumers are staying away from malls in favor of online shopping.

Over the 2017 holiday season, comparable store sales for the nine-week period ended December 30, 2017 fell 2.9% year-over-year to $720.8 million, down from $752.1 million in the same prior-year period.

In late 2017, the retailer said it would shutter at least 40 of its 260 locations across the U.S. by the end of 2018. That would reduce the company’s footprint by about 16%. Earlier in 2017, Bon-Ton said it was only going to shutter four or six stores in 2017.

In the third quarter of 2017, Bon-Ton announced that total sales fell 7.6% year-over-year to $543.3 million; comparable store sales fell 6.6%. The company blamed “unseasonably warm weather.”

The company’s third quarter net loss widened to $44.9 million, or $2.19 per share.

Meanwhile, the net loss for the first three quarters of 2017 increased significantly to $135.4 million, or $6.68 per share from $108.5 million, or $5.44 per share in 2016.

 

Sources

Bon-Ton Creditors May Propose Bankruptcy Within Weeks,” Bloomberg, January 12, 2018.

The Bon-Ton Stores, Inc. Enters Into Forbearance Agreements,” The Bon-Ton Stores, Inc., January 16, 2018.

The Bon-Ton Stores, Inc. Provides Holiday Sales Update,” The Bon-Ton Stores, Inc., January 8, 2018.

The Bon-Ton Stores, Inc. Reports Third Quarter Fiscal 2017 Results,” The Bon-Ton Stores, Inc., November 16, 2017.

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