Bon-Ton Stores files Chapter 11 bankruptcy as department stores reel

Nathan Bomey | USA TODAY

Show Caption Hide Caption Department stores you'll remember from your southern childhood The elegant doors might have closed, but the perfume-scented memories live on.

Corrections & Clarifications: An earlier version of this story misidentified one of Bon-Ton's two corporate headquarters. It should have been York, Pa.

Bon-Ton Stores, the corporate parent of several department store chains, tumbled into Chapter 11 bankruptcy protection as the company seeks a fresh lease on life.

Bon-Ton, whose brands include Boston Store, Carson's, Elder-Beerman and Younkers, had been on a fast track toward bankruptcy court after it recently announced plans to close 47 of its 260 stores.

The retailer, waylaid by heavy debt and the digital fallout that has ensnared many of its rivals, signaled that it's conducting "constructive discussions" with its creditors to identify a viable path forward.

That could theoretically involve asset sales, significant debt cuts, additional store closures or some combination.

"Bon-Ton is kind of a microcosm of the department store industry," said Philip Emma, senior analyst for restructuring intelligence firm Debtwire. "Their business model is selling brand-name merchandise that consumers recognize in a mall-based setting — and that’s the segment of retail that’s had the biggest struggle."

With some 24 million square feet of real estate and 23,000 employees, a liquidation of Bon-Ton would have sweeping implications.

Bon-Ton is aiming to keep stores open by selling the entire company, though retail bankruptcies often present the serious possibility of liquidation or a major downsizing.

The company has hired an outside agency to liquidate all of its assets if it can't find a viable alternative, financial adviser James Baird said in a court filing.

Bon-Ton asked a federal bankruptcy judge to approve procedures for a potential sale of its assets or external investment to continue operations.

"There are multiple parties active in the process, including a number of merchants and landlords who have expressed interest in participating in a transaction," Baird said.

Debtwire's Emma said Bon-Ton faces a legitimate risk of liquidation, in part because the company could go away even if it sells its assets.

"It looks like all potential options are still on the table," he said.

The company's stores are located in 24 states in the Northeast, Midwest and Great Plains. Bon-Ton has dual headquarters in York, Pa., and Milwaukee.

More: Bon-Ton Stores closing another 42 stores in 2018

More: Bon-Ton identifies stores it plans to close

"The actions we are taking are intended to give us additional time and financial flexibility to evaluate options for our business," Bon-Ton CEO Bill Tracy said in a statement.

The company has already secured up to $725 million in bankruptcy financing to continue operating.

Store closings at 42 locations announced Jan. 31 began Feb. 1 and will take about 10 to 12 weeks. Four other stores have already closed and another one is near closure.

Bon-Ton Stores had about $1.59 billion in assets and $1.74 billion in debt as of Oct. 28.

The company's top unsecured creditors include Estee Lauder, Hanesbrands, Keurig Green Mountain, Michael Kors, Perry Ellis and Ralph Lauren.

Like other retailers, the company blamed digital competition, nimble physical competitors and smartphone shopping for its demise.

The bankruptcy deals a blow to former Bon-Ton chairman and CEO Tim Grumbacher, who still owns 21% of the company's common stock, according to court records.

The company traces its roots to before the Civil War, when its first store opened in 1854.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.