(Reuters) - Bon-Ton Stores Inc BONT.PK said on Sunday it filed for bankruptcy protection to restructure its debt and explore a potential sale, making it the first major U.S. brick-and-mortar retailer to do so this year.
Department store operators have been struggling to fend off online sellers like Amazon.com Inc (AMZN.O) as shoppers increasingly choose to shop over the internet, resulting in a decline in mall footfalls.
More than 15 U.S. retailers filed for bankruptcy last year, the most in six years.
“The harsh reality is that while Bon-Ton’s management put in great effort to make the business sustainable, they were always running up a down escalator,” said Neil Saunders, managing director of GlobalData Retail.
Bon-Ton serves smaller communities in 26 states across the U.S. Northeast, Midwest and Great Plains under banners including Bon-Ton, Younkers and Bergner‘s.
“Many of Bon-Ton’s stores were in areas where the availability of branded fashions and homewares was traditionally poor,” Saunders said.
However, while this once made Bon-Ton a focal point and a destination for local shoppers, the internet has done much to change this dynamic, he said.
Bon-Ton said it received a commitment of up to $725 million in debtor-in-possession financing from its existing ABL lenders to support its operations.
The York, Pennsylvania-based department store operator, which has about 260 stores, listed both assets and liabilities in the range of $1 billion to $10 billion, according to a Chapter 11 filing with the Delaware bankruptcy court.
During the court-supervised process, Bon-Ton plans to continue operating in the normal course, it said.
Bon-Ton said its stores, e-commerce and mobile platforms under the Bon-Ton, Bergner‘s, Boston Store, Carson‘s, Elder-Beerman, Herberger’s and Younkers nameplates are open and operating as usual.
The company is on track to shutter 47 stores across the country, with the bulk concentrated in Illinois, Indiana, Pennsylvania and Wisconsin, it said.
“We are currently engaged in discussions with potential investors and our debtholders on a financial restructuring plan,” Bon-Ton Chief Executive Bill Tracy said.
AlixPartners LLP is serving as restructuring adviser and PJT Partners Inc is acting as financial adviser, the company said.
Reuters reported on Friday Bon-Ton had secured a loan that will allow it to file for bankruptcy as early as Sunday.
(This version of the story corrects paragraph 9 to say company’s assets and liabilities were $1 billion-$10 billion each. Earlier version said assets were $50,001-$100,000 and liabilities $500 million-$1 billion)
Reporting by Subrat Patnaik in Bengaluru; Editing by Gopakumar Warrier