Belk Deleverages as KKR, Hein Park Take Control

Belk Inc., the privately owned regional department store, has deleveraged and has new owners.

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On Tuesday, the Charlotte, N.C.-based Southeastern regional department store chain revealed that it deleveraged with its first and second lien lenders and its primary owner, the Sycamore Partners private equity firm.

Through the transaction, certain of Belk ’s existing lenders, including funds associated with global investment firm KKR, and Hein Park, an investment management firm focused on distressed debt, will take over a controlling interest of the business from Sycamore.

Sycamore acquired Belk in 2015 for $3 billion. It previously had been owned and operated by the Belk family.

Under the terms of the merger agreement in 2015, New York-based Sycamore Partners acquired 100 percent of Belk in a transaction with an estimated enterprise value at closing of about $3 billion. Furthermore, all Belk stockholders received $68 a share in cash for each share of Belk common stock they owned.

On Tuesday, Belk reported that it reduced its outstanding debt by more than $950 million, amended its existing asset-based credit facility to extend the maturity date to July 2029, and secured about $485 million in new capital, including $275 million of secured term loans and a $210 million securitization facility secured by revenue streams from the company’s loyalty credit card program.

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The retailer said that by working with lenders to deleverage significantly, thousands of jobs are being preserved, and there’s additional liquidity to bolster vendor partnerships.

“Today’s announcement marks a pivotal milestone for Belk as we move into the future with a capital structure that positions our business for sustainable, long-term growth and profitability,” said Don Hendricks, Belk’s chief executive officer, in a statement. “We are confident that our stronger balance sheet will enable us to build on the momentum and growth we’ve seen in recent quarters, better serve our customers and their communities and be an even stronger partner to our vendors.”

Belk has been through some tough times recently, including the pandemic, the consumer spending shift away from stores to the internet, and a Chapter 11 bankruptcy and quick restructuring in 2021. However, the department store enjoys great loyalty in its region, particularly in secondary markets, and maintains a true southern identity. Belk opened its first store in 1888, and currently operates 291 stores in 16 southeastern states, as well as belk.com and its mobile app.

Kirkland & Ellis LLP served as legal adviser, Lazard Frères & Co. LLC served as investment banker, KKR Capital Markets LLC served as the structuring agent and sole arranger on the card program securitization, and C Street Advisory Group served as strategic communications adviser to Belk.

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