The company has suffered losses over the past years and is facing liquidity issues.
Discount chain Big Lots received approval to shut down hundreds of outlets, after the company expressed “substantial doubt” on continuing business operations.
The agreement originally gave approval to close up to 150 outlets, and the amendment boosted it up to 315. In addition, a $900 million credit facility was reduced to $800 million and interest rates on borrowings have been raised by 50 basis points.
The company also raised concerns about its ability to remain operational as it incurred net losses in 2022, 2023, and the first quarter of 2024, and was forced to use cash in its operating activities, the June filing said.
“Due to ongoing negative macroeconomic factors and their uncertain impacts on the company’s business, results of operations, and cash flows, the company expects to experience further operating losses,” according to the filing.
“The current financial performance does not yet reflect the stronger business model that we’ve created through our five key actions, but we expect the fruits of those efforts to become more apparent in the back half of the year.”
Series of Store Closures
At the same time, several other retail chains have announced the shuttering of outlets this year.
Businesses are experiencing liquidity issues amid an environment of high interest rates that have made loans very expensive.
In June, Federal Reserve officials had suggested a potential hike in interest rates if inflation were to remain high. This would make financing even more expensive for businesses.
Faced with financial difficulties like high interest rate loans, companies struggling to keep their operations running may end up finding themselves with no choice but to shut down.
“Based on current trends and economic indicators, I expect bankruptcy filing volumes to continue this steady increase throughout the remainder of 2024 and into 2025.”
It expects rate relief to be “months away,” due to which many companies could seek reorganization bankruptcy in which firms undergo a reorganization of assets and liabilities under court supervision. This could provide businesses with the time necessary to stabilize their financial situation, S&P stated.