The company filed its petition in a bankruptcy court in Nebraska late Wednesday. Shopko secured $480 million in debtor-in-possession financing from certain pre-petition lenders, led by Wells Fargo, N.A. The company, which will continue to operate and serve its customers, vendors and partners during the bankruptcy process, said the new financing facility will ensure that “suppliers and other business partners and vendors will be paid in a timely manner for authorized goods and services provided during the Chapter 11 process, in accordance with customary terms.”
Russ Steinhorst, chief executive officer, said by operating a “smaller and more focused store footprint, we will be able to build a stronger Shopko” to better serve a constituency base that includes customers and vendors.
The company in December said it would shutter 39 store across 19 states. Following the Chapter 11 court filing, the company said it would close additional stores and relocate more than 20 Optical centers to freestanding stores, as well as conduct an auction process for its pharmacy business. A total of about 105 stores will be closed, including the doors disclosed last month.
The retailer’s legal team was in bankruptcy court on Thursday, where they won approval to pay employee wages, healthcare coverages and retirement benefits. Shopko also receive approval, on an interim basis, to access a portion of the DIP facility to continue operations during the bankruptcy process.
Founded in 1962 and headquartered in Green Bay, Wisconsin, the $3 billion retailer operates more than 360 stores in 26 states across the Central, Western and Pacific Northwest regions. It became a public company in 1991. In 2012, the company merged with Pamida and converted more than 170 Pamida stores to the Shopko name. The retailer currently operates several retail formats, all under the Shopko nameplate.
Private equity firm Sun Capital Partners owns the general merchandise chain, which it acquired for $1.1 billion in 2005. Officials at Sun Capital could not be reached for comment.
Retailers typically wait until after the holiday season to file for bankruptcy court protection as they need whatever cash they can get to help fund the bankruptcy. So far, this January has proven to be a busy month for distressed retailers. Sears on Wednesday determined that its chairman Edward S. Lampert and his hedge fund ESL Investments offered the best bid for the company although unsecured creditors have now filed court papers indicating they are ready to file a lawsuit against Lampert and ESL.
In addition to Shopko’s bankruptcy filing, Gymboree on Thursday filed its own Chapter 11 petition in a bankruptcy court in Virginia. Gymboree’s filing was so it could do an orderly wind-down of operations as it shutters the business.