Belk downgraded to Ca after netting restructuring support agreement

Belk Inc. was downgraded on Jan. 29 by Moody's to Ca, from Caa1, both with negative outlooks, after Belk netted a restructuring support agreement, or RSA, with holders of more than 75% of its first-lien term loan and 100% of its second-lien term loan. Majority owner Sycamore Partners is also a party to the RSA.

Under the agreement contemplated by the RSA, total funded debt would be reduced by approximately $450 million, while term loan maturities would be extended to July 2025. Moody's said the restructuring is expected to be completed via a pre-packaged bankruptcy filing by the end of February.

Moody's said the downgrade incorporates the very high likelihood of a default in executing the transaction backed by the RSA. The rating also reflects Belk's "very weak" liquidity should the transaction not be implemented.

Moody's said $225 million in new capital that would come in to Belk under the deal supported by the RSA would enable the company "to return to more normalized terms with its vendors." The rating agency added that the post-transaction structure will see Sycamore remaining as majority owner.

Charlotte, N.C.-based Belk operates 291 department stores in 16 primarily southern U.S. states.