(Reuters) - Nordstrom Inc said on Monday that a founding family group had suspended attempts to take the U.S. department store operator private because of difficulties in arranging debt financing for its bid ahead of the key holiday shopping season.

FILE PHOTO: The Nordstrom store is pictured in Broomfield, Colorado, February 23, 2017. REUTERS/Rick Wilking/File Photo

Nordstrom shares dropped as much as 7 percent as investors were again reminded of the challenges of the U.S. brick-and-mortar retail sector, which has seen a record number of bankruptcies this year amid competition from e-commerce firms such as Amazon.com Inc and off-price stores like TJX Cos Inc.

Nordstrom’s rival Hudson’s Bay Co, owner of the Saks Fifth Avenue and Lord & Taylor retail chains, has also been exploring going private, Reuters has reported. Its shares dropped 5 percent on Monday as analysts said the chances of other retailers clinching such deals had become slimmer.

“It’s difficult to make a case for private equity investing in these legacy retail companies when the play is really not about growing the company so much as right sizing it,” said Neil Saunders, retail analyst at Global Data.

Nordstrom shares dropped to $39.64, their lowest level in five months, giving the company a market capitalization of around $6.6 billion.

Nordstrom said in June that the family group, which owns 31.2 percent of the storied retailer, was looking to take the company private. Sources said the family believed it could better manage the company’s operational restructuring and transition to e-commerce away from the public markets.

Nordstrom, which has sought to become more competitive by investing in its off-price discount chain Nordstrom Rack, in August reported better-than-expected quarterly same-store sales, as more people shopped at its online stores.

The family was seeking to partner with buyout firm Leonard Green & Partners LP on the bid, sources had said. But investment banks balked at providing the debt financing required for the bid, estimated at between $7 billion and $8 billion.

Last Friday, representatives of the Nordstrom family group informed Nordstrom’s special board committee handling the potential deal that it had given up on efforts to take the company private until the end of the year because of the difficult of obtaining debt financing, according to a Nordstrom regulatory filing. It added that the group would explore a take-private bid after the holiday season.

A source close to the family group said Nordstrom’s upcoming holiday sales did not have to be particularly strong for a deal to materialize, and that it was the uncertainty of what the shopping season will look like that weighed on the banks’ appetite to finance the bid.

However, the market for leveraged buyouts in the retail sector has been very choppy of late, with debt investors licking their wounds after participating in recent deals.

The $2 billion of bonds issued by specialty pet retailer PetSmart in May to finance its $3 billion acquisition of online rival Chewy have suffered steep losses.

When private equity firm Sycamore Partners acquired office supplies retailer Staples Inc for $6.9 billion last month, it separated its retail from its business-to-business delivery operations to make financing more palatable to investors.

However, Sycamore was forced to cut the size of the planned bond deal by $300 million to $1 billion to pay a higher yield than originally targeted to sell the debt. The bonds have lost some of their value since then.

Neiman Marcus, another Nordstrom’s rival, canceled plans earlier this year for an initial public offering after struggling with its soaring debt pile.

Some activist investors are pushing ailing retailers to explore other strategies.

Hedge fund Snow Park Capital Partners LP has advocated for department store operator Dillard’s Inc to unlock the value of its real estate by replacing some of its own stores with other, potentially higher value, occupants.