Big Lots liquidation looms after plan to sell to Nexus Capital falls apart

By Reshmi Basu | Bloomberg

Big Lots does not expect to complete a planned sale of its business to private equity firm Nexus Capital Management LP, putting the discount retailer that employs more than 27,000 people at risk of liquidation.

The company said it continues to work toward completing an alternative transaction with Nexus or another party, and aims to complete that by early January, it said in a release.

A valuation appraisal of the bankrupt company’s inventory came in lower than expected, which threatened the economics of the sale of the chain to Nexus, Bloomberg reported earlier on Thursday. At the same time, landlords had demanded that Big Lots explain why it hadn’t 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 on Monday demanded that the company either pay tens of millions of dollars in back rent, or be liquidated by a court-approved trustee. US Bankruptcy Judge J. Kate Stickles is scheduled to hear a status report on that dispute during a court hearing Thursday.

A representative for Guggenheim Partners, which is advising the company, declined to comment. Representatives from Big Lots, Nexus, as well as Kirkland & Ellis, which is advising Nexus, and the company’s legal counsel Davis Polk & Wardwell, did not return messages seeking comment.

Columbus, Ohio-based Big Lots has suffered from declining sales for years, including in recent quarters, as rising inflation squeezed the wallets of its budget-conscious shoppers. Other retailers, including Conn’s Inc. and LL Flooring Holdings Inc., have come under strain amid a slowdown in home spending.

Party City Holdco is planning to file for bankruptcy possibly within the next two weeks, in a process that may lead to the liquidation of its stores, Bloomberg reported. Container Store Group is also preparing to file for bankruptcy in the coming weeks following mounting losses and escalating liquidity woes.