(Reuters) - Bon-Ton Stores Inc BONT.PK, one of the largest U.S. department store operators, said in court on Tuesday it was in talks with potential investors as part of an effort to emerge from Chapter 11 bankruptcy, despite calls from some bondholders that it liquidate.
York, Pennsylvania-based Bon-Ton, with 23,000 employees and 256 stores across 23 states, on Sunday sought protection from creditors owed more than $1 billion. It said it will close 47 stores in 2018.
Roughly half of the dozens of retail Chapter 11 bankruptcies filed in the past five years have ended in liquidation as traditional brick-and-mortar operators struggled to adapt to rapidly changing consumer tastes and a rise in e-commerce.
At a hearing in U.S. Bankruptcy Court in Delaware, Bon-Ton’s lawyers said the company is engaged in due diligence with a number of potential investors to support its reorganization. It also is exploring a full or partial sale, or if needed, a liquidation, the lawyers said.
They proposed an April 2 deadline for bids, even as a group of bondholders argued for an immediate liquidation as the most promising road to recovery for creditors.
“The prospect that this business will survive is, at best, uncertain,” lawyer Sidney Levinson said in court on behalf of holders of $223 million in second lien notes.
Bon-Ton was founded in 1898 when Max Grumbacher and his father opened a one-room millinery and dry goods store. It went on to become one of the largest U.S. regional retail department store operators under seven banners including Bon-Ton, Younkers, Carson Pirie Scott and Bergner’s.
It ranks among the 20 largest retail bankruptcies ever filed by assets, according to BankruptcyData.
As part of its Chapter 11 filing, Bon-Ton has received $725 million in debtor-in-possession funding from existing asset based lenders, allowing it to continue stocking its shelves and pay employees during its bankruptcy.
Burt Flickinger, managing director of retail consultancy Strategic Resources Group, said Bon-Ton’s bankruptcy funding may put it in a better position with vendors than other struggling retailers such as Sears Holdings Corp SHLD.O ahead of the next key selling season in May.
Sears, once the largest U.S. retailer, has announced a series of cost-cutting measures and debt deals meant to turn around the company, including hundreds of store closures.
Reporting by Tracy Rucinski in ChicagoEditing by Noeleen Walder and Matthew Lewis