US department store retailer Belk Inc has filed for Chapter 11 bankruptcy and won approval to cut US$450m of its debt.

The company, owned by Sycamore Partners, filed for protection with the Bankruptcy Court for the Southern District of Texas, Houston Division, and gained approval yesterday (24 February).

Belk’s bankruptcy plan was approved by Judge Marvin Isgur, paving the way for the retailer to emerge from Chapter 11.

In a declaration to the court ahead of the hearing, Belk’s CFO William Langley, said: “Amid the Covid-19 pandemic and general market-related challenges, significant cash interest obligations, and declining liquidity, the debtors determined that a comprehensive restructuring was necessary to best position their business for long-term success. In November 2020, the debtors entered into negotiations with certain of their prepetition term loan lenders and the sponsor to explore potential transactions.

“The restructuring transactions embodied in the plan will eliminate approximately $450m of the debtors’ prepetition funded debt obligations, materially reduce the debtors’ go-forward debt service, and provide the reorganized debtors with $225m in new money term loans. Importantly, this will allow the debtors to satisfy all trade, customer, and other non-funded debt claims in full in the ordinary course of business, continue to employ their approximately 17,000 employees, and keep all 291 store locations open.”

Belk is understood to have listed assets and liabilities of between $1bn and $10bn each in its petition. The company’s plan cuts its debt and provides $225m of new capital from Sycamore and other lenders.

Department store chains have struggled as the shopping trend has moved increasingly online. In 2020, a number of chains filed for bankruptcy, both in the UK and the US, including JCPenney, Neiman Marcus Group and Debenhams.