Private equity investors close deals for Big Lots and LL Flooring

After years of difficulties, Columbus, Ohio-based discount retailer Big Lots Inc. has filed for Chapter 11 bankruptcy in Delaware, but a savior is in sight.

Meanwhile, Richmond-based LL Flooring is getting a respite after previously admitting defeat in its bid to find a buyer and preparing to wind down its operations.

Big Lots plans to sell the company's assets and ongoing business in a court-supervised process, according to a press release. According to the retailer's announcement, the company previously entered into a purchase agreement with an affiliate of private equity investor Nexus Capital Management.

The structure of the agreement provides for Nexus to act as a so-called “stalking horse bidder.” This means that Nexus will acquire the company if no higher or better offers are received from other parties.

Big Lots sought court protection after suffering years of declining store sales and store closures across the U.S. In its court filing, it listed assets and liabilities ranging from $1 billion to $10 billion. The company expects the transaction with Nexus to close in the fourth quarter of this year if the private equity firm is confirmed as the successful bidder, which must be approved by a bankruptcy judge.

Fresh capital for big lots

The retailer has secured $707.5 million in financing commitments in the form of a post-emergence credit facility, so Big Lots expects to have sufficient liquidity to continue operations while it works to finalize the sale.

The bankruptcy financing will give Big Lots $35 million in fresh capital and consolidate other corporate debt, court documents show, balancing existing corporate debt with repayment of newly borrowed money. The company operates nearly 1,400 stores in 48 states and says it has about 9,600 full-time employees and about 18,100 part-time employees.

The company said it has already closed dozens of stores and cut costs to reduce expenses and has about $556 million in long-term debt, according to court documents. Big Lots said it will need to close more stores to continue operating effectively and promised to pay its suppliers in full after the bankruptcy. In the meantime, customers can continue to collect and redeem rewards and use gift cards and store credit cards.

“Taken together, these actions are intended to accelerate our efforts to improve our performance and strengthen our business for the future,” the company said.

Founded in 2013, Nexus Capital owns a number of other retail and consumer brands, including Toms, Dollar Shave Club, Natural Balance and Lamps Plus.

LL Flooring Saved

Separately, Richmond-based hardwood flooring retailer LL Flooring, after previously admitting it was winding down the business because it could not find a buyer, is set to be sold as a going concern to Miami-based private equity firm F9 Investments.

LL Flooring, formerly known as Lumber Liquidators, filed for Chapter 11 bankruptcy last month and said it would close about 100 stores. Pending approval from the U.S. Bankruptcy Court for the District of Delaware, the deal is now expected to close by the end of September. F9 Investments, the company's largest shareholder, which has previously criticized its business strategy, will acquire 219 stores, the company's inventory, a distribution center in Sandston, Virginia, and LL Flooring's intellectual property and other assets.

In a statement, Charles Tyson, president and CEO of LL Flooring, said the company was “pleased to have reached this agreement with F9 after significant efforts by our team and advisors to preserve the business.”

Another 211 LL Flooring stores are still pending closure, including 117 locations that recently began closing and 94 others that were already in the process of closing when the Virginia-based company filed for Chapter 11 bankruptcy on Aug. 11.