(Bloomberg) — Bankrupt retailer Big Lots Inc. no longer anticipates it can complete its asset sale to private equity firm Nexus Capital Management LP and will commence the sale of its stores in coming days to protect the value of its real estate.
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The discount chain that employs more than 27,000 people said in a statement Thursday it continues to look for another way to stay in business through a transaction it would look to complete by the end of January if a deal can be struck.
“We all have worked extremely hard and have taken every step to complete a going concern sale,” Bruce Thorn, Big Lots’ president and chief executive officer said. “While we remain hopeful that we can close an alternative going concern transaction, in order to protect the value of the Big Lots estate, we have made the difficult decision to begin the GOB process.”
The announcement comes as a valuation appraisal of the company’s inventory was lower than expected, making the economics of the sale to Nexus no longer viable, according to people with knowledge of the matter who asked not to be identified discussing a private matter. At the same time, landlords had pressured the company in court to explain why it hadn’t closed the deal with Nexus, which agreed to buy the company after it filed for Chapter 11 in September.
An official committee of unsecured creditors on Monday had asked in court that the company either pay tens of millions of dollars in back rent, or be liquidated by a court-approved trustee.
Shuttering Stores
Big Lots will begin going-out-of-business sales at about 870 stores, company attorney Brian M. Resnick said during a hearing Thursday in front of US Bankruptcy Judge J. Kate Stickles.
The company is still talking to Nexus and another firm about saving “several hundred” stores instead of the entire group Nexus had originally agreed to take over, Resnick said. That long-shot effort would have to come together “in a couple of weeks,” Resnick added.
There is very little time to get a new deal, according to Stickles. “This is what I would characterize as a melting ice cube,” she said.
A representative for Guggenheim Partners, which is advising the company, declined to comment. Representatives from Big Lots, Nexus, as well as Kirkland & Ellis, which is advising Nexus, and the company’s legal counsel Davis Polk & Wardwell, did not return messages seeking comment.
