Jan 27, 2021 03:00 AM EST
Belk has declared itself bankrupt after nearly 190 years. The North Carolina-based department store has filed for Chapter 11 bankruptcy after its business has been ravaged by the COVID-19 pandemic, making its financial obligations harder to meet.
The company, which has served generations of shoppers for over a century and half, announced Tuesday it will file for the dreaded bankruptcy, as reported by USA Today.
The chain's owner, private equity firm Sycamore Partners, reassured shoppers that Belk will be operating normally as it goes through the processes of finalizing the bankruptcy, as the Charlotte Observer reported.
Chapter 11 bankruptcy allows companies stay open while they get court approval of a plan to exit bankruptcy. While open, the company's creditors will get the chance to scrutinize and weigh exit plan and can try to stop it.
Sycamore Partners said it also anticipates to emerge from bankruptcy by the end of February. It will maintain majority control of Belk, based on an agreement it entered with certain Belk's creditors.
A group of the department store's creditors, led by the private equity firms KKR and Blackstone, will be given a minority stake. The bankruptcy plan is expected to help Belk pay off around $450 million of debt.
"We're confident that this agreement puts us on the right long-term path toward significantly reducing our debt and providing us with greater financial flexibility to meet our obligations and to continue investing in our business," Belk CEO Lisa Harper shared in a statement.
The 133-year-old chain has its humble beginnings in a small store located in Monroe, North Carolina, opened by William Henry Belk in 1888.
Today, a total of three generations of the Belk family already led the company to become the biggest family-owned department store chain in the country. More so when 2015, the family sold it for $3 billion to Sycamore Partners.
The sale to Sycamore allowed it to pay off $2 billion in debt at a time when department stores were starting to wane in popularity and lose some loyal customers.
However, the pandemic certainly did a massive damage. The department store has struggled during the coronavirus pandemic as customers resorted to online shopping when they are at first, banned from going out and eventually, when they started to personally avoid in-person shopping to stay safe.
Belk workers needed to be furloughed in March as the pandemic hit and cut senior staff pay up to 50%. At the time, stores were compelled to close temporarily, which lasted for months.
In July, Belk cut a significant number of jobs, although the exact figure is undisclosed. Most of those who lost their employment were reportedly from its headquarters in Charlotte, North Carolina.
It can be remembered that even before the pandemic was announced, Belk already eliminated 80 corporate jobs in February 2020.
Belk employs over 20,000 employees at its nearly 300 stores located across 16 Southeastern states. For it to vanish is not an imaginable option, because it can do a great damage to the economy.
In addition, Belk's corporate offices, which opened in 1988 in Charlotte, now employ around 1,300 workers.
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