Big Lots enters sale agreement with Nexus, initiates Chapter 11 proceedings

Big Lots announced that it has entered into an agreement with an affiliate of Nexus Capital, pursuant to which Nexus has agreed to acquire substantially all of the company’s assets and ongoing business operations. To facilitate the transaction, the company, together with each of its subsidiaries, initiated voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the District of Delaware. During and after this process, Big Lots will continue to serve customers at their nearest store location or online. Since the pandemic, Big Lots has taken steps to accelerate its strategic initiatives focused on improving sales and boosting its long-term performance and profitability. Like many other retail businesses, the company has been adversely affected by recent macroeconomic factors such as high inflation and interest rates. The prevailing economic trends have been particularly challenging to Big Lots, as its core customers curbed their discretionary spending on the home and seasonal product categories that represent a significant portion of the company’s revenue. While the company’s underlying performance has been improving, the board of directors conducted a broad strategic review of alternatives and determined that entering into the sale agreement with Nexus, and initiating a court-supervised sale process, is the best path forward. As part of the court-supervised sale process, the company is continuing to assess its operational footprint, which will include closing additional store locations. The company will also continue to evaluate and optimize its distribution center model. Under the terms of the sale agreement, Nexus will serve as the “stalking horse bidder” in a court-supervised auction process pursuant to section 363 of the U.S. Bankruptcy Code. Accordingly, the proposed transaction is subject to higher or otherwise better offers, Court approval, and other conditions. Under the sale agreement, if Nexus is deemed the winning bidder, the parties anticipate closing the transaction during the fourth quarter of 2024. In connection with the court-supervised process, Big Lots has secured commitments for $707.5M of financing, including $35M in new financing from certain of its current lenders, in the form of a postpetition credit facility. Upon court approval, the DIP financing facility, coupled with cash generated from the company’s ongoing operations, are expected to provide sufficient liquidity to support the company while it works to complete the sale transaction. The company has also filed a number of customary motions seeking court approval to continue supporting its operations, including continued payment of employee wages and benefits, and payments to certain critical vendors in the ordinary course of business. The company anticipates receiving court approval for these requests and expects to pay vendors in full under normal terms for any goods and services provided after the filing.