Department Store Bon-Ton Hires Restructuring Adviser: Report

Bon-Ton Stores Inc. (BONT) , which has seen its stock lose half its value this year and its interest expenses account for a significant portion of its losses, has reportedly hired a turnaround specialist.

The company has retained AlixPartners LLP as a turnaround adviser and is looking for advisers in other areas as well, according to a Thursday, Aug. 31, report from Reuters.

Bon-Ton shares on Friday afternoon were up 2 cents to 68 cents. The Nasdaq-listed shares were at $1.47 at the close of 2016.

On Aug. 30, Brigade Capital Management LLC funds including Brigade Leveraged Capital Structures Fund Ltd. - Cayman Islands disclosed an 8.59% equity stake in a regulatory filing. Brigade specializes in credit strategies, including high yield and distressed debt. Brigade also has experience in bankruptcy and restructurings.

Bon-Ton is carrying $849.33 million in long-term debt, according to an Aug. 17 earnings statement.

In its quarterly report for the period ended April 29, the company reported a $57.3 million loss, including $18 million in interest expenses.

In April the company also reached a fifth amendment to its $880 million revolving credit agreement, extending the maturity of the $730 million Tranche A to 2022, provided that the $150 million Tranche A-1 is paid off by March 2021 or extended to 2022.

Tranche A is subject to a springing maturity date, though, that is 60 days before the earliest of the maturity date of any senior note and certain permitted debt secured by junior liens. As a result, it could come due before 2022.

Moody's Investors Service Inc. compared Bon-Ton with Dillard's Inc. (DDS) and Hudson's Bay Co. in a July peer snapshot.

That analysis showed that revenues and Ebitda were mostly flat for Bon-Ton and Dillard's since 2013, while Bon-Ton's debt-to-Ebitda ratio had climbed from 6 times to 8 times over the same period.

At the time of the snapshot, Bon-Ton's corporate family rating was Caa1 with a stable outlook. Moody's had lowered it to that rating from B3 in 2015.

"Bon-Ton's Caa1 rating reflects the company's significant leverage with unadjusted debt/Ebitda expected to exceed 8 times by the end of Bon-Ton's current fiscal year and that Ebitda less capital expenditures is expected to be insufficient to cover interest costs," Moody's said in a December 2015 ratings action. "The company's revenues continue to contract through store closings and negative comparable store sales, and its operating margins are low and declining as well."

Bon-Ton started doing business in York, Pa., in 1898, when Samuel Grumbacher and his son Max opened a store under the name Grumbacher & Son. Descendant Thomas Grumbacher owns the largest equity stake in the company with 22.9% of the shares.

The company has a long history of acquisitions, including the purchases of Adam, Meldrum and Anderson Co. in 1994, Elder-Beerman Stores Corp. in 2003 and 142 Saks Inc. Northern Department Store Group stores in 2005.

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