(Bloomberg) — Bankrupt retailer Big Lots Inc no longer anticipates completing its asset sale to private equity firm Nexus Capital Management LP and will begin selling its stores in the coming days to protect the value of its real estate.
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The discount chain which employs more than 27,000 people said in a statement on Thursday that it was continuing 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 have all worked very hard and taken every step to complete a live business sale,” said Bruce Thorn, president and chief executive officer of Big Lots. “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 came in lower than expected, making the economics of the sale to Nexus now 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 pressed the company in court to explain why it had not 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 had on Monday asked in court that the company either pay tens of millions of dollars in back rent, or be liquidated by a court-approved trustee.
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Big Lots will begin going out of business in about 870 stores, company attorney Brian M. Resnick said during a hearing Thursday before U.S. Bankruptcy Judge J. Kate Stickles.
The company is still talking with Nexus and another company 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 describe as an ice cube melting,” he said.
A representative for Guggenheim Partners, which advises the company, declined to comment. Representatives from Big Lots, Nexus, as well as Kirkland & Ellis, which advises Nexus, and the firm's legal counsel Davis Polk & Wardwell, did not return messages seeking comment.