Belk Said In Talks With KKR For Financing Package

Belk Inc. is trying to shore up its balance sheet.

Bankruptcy Possible For Delta Apparel

The department store retailer is believed to be seeking new financing to help refinance existing debt, a move that would help it add more liquidity to its financial structure.

A Bloomberg report said Belk is in talks with KKR & Co. Inc. for a financing package that could possibly include $200 million from private credit firms. It also said that Belk’s intellectual property and credit-card royalties could be assets that will be used for collateral for the loans.

Belk is no stranger to the watch list of many credit analysts. That’s mostly because the company is privately held, and therefore executives aren’t as forthcoming as public entities about the firm’s finances. That leaves analysts to decipher current financial conditions from data that’s often outdated.

Belk was founded as a bargain retailer by William Henry Belk in May 1988. Currently operating under the third generation of Belk family leadership, the company’s website said Belk is the largest privately owned mainline department store in the U.S.

Belk was sold to private equity firm Sycamore Partners in December 2015 in a $3 billion deal. In February 2021, the chain completed a surprising one-day tour of Chapter 11 through a pre-packaged reorganization that eliminated $450 million in debt. At the time, it was believed that Sycamore had the support of lenders KKR and Blackstone Credit for it to retain majority control, while the two took a minority stake in the retailer.

US Default Risk for Fashion Retailers Shows Improvement in May

By March 2023, the Charlotte, N.C.-based retailer saw its debt ratings downgraded by S&P Global Ratings. Analysts said they were concerned about “weakened consumer demand and thinning liquidity.” Lead credit analyst Lauren E. Slade said at the time that S&P’s negative outlook reflects the expectation that Belk would need to restructure its credit facilities. The S&P report also warned that Belk’s capital structure was “unsustainable.”

Another credit analyst said Belk’s balance sheet is pressured by having to make interest payments on the debt after using up its payment-in-kind (PIK) options in February 2023. The PIK option allowed Belk to use securities or equity to make the interest payment in lieu of cash.

Belk has an asset-based loan due in August. It also has a first-lien term loan that has is set to mature in 2025.

Executives at Belk did not respond to a request for comment. A Sycamore representative declined comment.

Gildan Inks Private Placement Deal, Vows to Stay in Quebec