Reports indicate that The Bon-Ton Stores (BONT) has hired a restructuring firm "to look at ways to refinance debt and prepare for a possible bankruptcy filing." I had recently mentioned that there was no immediate impetus for Bon-Ton to restructure, but also that it had an extremely low chance of avoiding restructuring in the longer-term. The hiring of PJT Partners may be an indication that Bon-Ton sees the eventual writing on the wall and wants to voluntarily look at restructuring rather than have a restructuring forced on it in a few years by then looming debt maturities.
A near-term restructuring is not a certainty, but if it does occur Bon-Ton's current common equity is very likely to be wiped out (although with a market capitalization of $11 million, it is nearly wiped out already). Bon-Ton's second-lien debt would need to be converted into equity during a restructuring and it probably would take a significant hit as well, as Bon-Ton has $850 million in net debt and a valuation of 5x adjusted EBITDA would put its total value at around $600 million.
This article will explore the goals and impact of a restructuring, assuming that Bon-Ton goes down that route.
