Big Lots wins approval of rescue deal after creditor backlash

BANKRUPT retailer Big Lots won court approval of a rescue deal to save some of its stores from shutting-down despite challenges from vendors that claimed the deal unfairly saddles them with steep losses. 

Judge J Kate Stickles said late Tuesday (Dec 31) she would approve a sale of the retailer to Gordon Brothers Retail Partners, which intends to transfer between 200 and 400 Big Lots stores to Variety Wholesalers. The sale may also save thousands of jobs, lawyers said on Tuesday.

The deal was announced days after an earlier sale to Nexus Capital Management unravelled and was also at risk of falling apart following creditor backlash. Several Big Lots vendors opposed the deal because it repays lenders while leaving trade creditors with steep losses. 

Big Lots has already commenced going out-of-business sales at its more than 800 remaining stores and said it would launch a total liquidation of the business if the sale was not approved. 

After a day-long hearing, Stickles said neither the sale to Gordon Brothers or a liquidation is ideal. However, the sale is the best option available and maximises the value of Big Lots’ assets in order to repay creditors, Stickles said. 

Under the deal, Gordon Brothers would acquire Big Lots’ assets in exchange for repaying the retailer’s Chapter 11 loan plus as much as US$17 million in unpaid rent and other fees and expenses related to the bankruptcy, according to court documents.

Vendors accused the retailer of continuing to order goods after filing Chapter 11 in September despite realising the company was unlikely to have enough cash to cover its costs. Big Lots has incurred about US$250 million in expenses in bankruptcy, which it will not be able to repay, creditors lawyers said on Tuesday. 

The retailer had no other options after the Nexus deal failed and a full liquidation would result in the loss of thousands of jobs and even worse losses for Big Lots creditors, company lawyer Adam Shpeen said.  The deal was supported by a committee representing Big Lots unsecured creditors and company lenders. 

“There is no alternative,” Shpeen said during Tuesday’s hearing, adding a liquidation “would be a complete mess.”

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Big Lots strikes deal to save stores, stop brand from closing

The case is Big Lots, number 24-11967, in the US Bankruptcy Court for the District of Delaware. BLOOMBERG