08:52 AM EDT, 09/09/2024 (MT Newswires) -- Big Lots ( BIG ) filed for Chapter 11 bankruptcy protection and agreed to sell itself to an affiliate of private-equity firm Nexus Capital Management, as macroeconomic headwinds weigh on the discount retailer's business.

The company and its subsidiaries initiated the voluntary proceedings in the US Bankruptcy Court in Delaware on Monday. The retailer also struck a deal for Nexus to substantially acquire all of its assets and ongoing operations, with the firm serving as the "stalking horse bidder" in a court-supervised auction process.

The sale to Nexus is expected to be completed during the fourth quarter, following court approval, and if no other better or higher offer for Big Lots ( BIG ) materializes, according to the companies. Big Lots' ( BIG ) shares tumbled nearly 40% in premarket activity.

"The actions we are taking today will enable us to move forward with new owners who believe in our business and provide financial stability, while we optimize our operational footprint, accelerate improvement in our performance, and deliver on our promise to be the leader in extreme value," Big Lots ( BIG ) Chief Executive Bruce Thorn said in a statement.

The move follows a strategic review by the retailer's board of directors after factors such as high inflation and interest rates impacted the discretionary spending power of core customers. As part of the court-supervised sale process, Big Lots ( BIG ) will continue to evaluate its operations, including shutting down additional stores, and optimize its distribution center model.

The company also secured $707.5 million in financing commitments, including $35 million in new funding from current lenders. If the court approves it, the credit facility combined with the retailer's ongoing operations are anticipated to provide it enough liquidity to support itself during the sale process. The company is also seeking court approval to continue business operations like paying employees and certain critical vendors.

Meanwhile, Thorn said Big Lots' ( BIG ) second-quarter underlying comparable sales "improved sequentially relative" to the prior-three-month period on a yearly basis, while gross margins "significantly improved." The ongoing quarter is "off to a good start" with "significant sequential improvement" in underlying comparable sales versus the second quarter, as well as gross margin expansion compared with last year, according to Thorn.

The retailer will report its full second-quarter results on Thursday, it said in the statement.

Price: 0.2970, Change: -0.20, Percent Change: -40.22