Shopko announces financial restructuring, implements path forward to enhance company’s profitability and growth profile

Shopko (“the Company”), a leading operator of general merchandise stores throughout the Central, Western and Pacific Northwest regions of the United States, has announced that it, along with its subsidiaries, has filed voluntary petitions for a court-supervised financial restructuring under Chapter 11 of the United States Bankruptcy Code and that its first-day motions to help facilitate continued operations while the Company operates under Chapter 11 protection were approved January 16 by Honorable Thomas L. Saladino of the U.S. Bankruptcy Court for the District of Nebraska.

As part of the Court’s approval of first day motions, Shopko received authorization on a final basis from the Court to provide employee wages, healthcare coverages and other benefits, including retirement benefits, without interruption, and pay vendors and suppliers for authorized goods and services provided on or after the filing date. Additionally, customer programs, including gift cards and loyalty program, will be honored and continued in the ordinary course.

The Court’s approval also affirmed on an interim basis access to $480 million debtor-in-possession (DIP) financing from certain of its pre-petition secured lenders, led by Wells Fargo, N.A. as administrative agent, to help fund and protect its operations during the Chapter 11 process. This incremental liquidity 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.

“This decision is a difficult, but necessary one,” said Russ Steinhorst, Chief Executive Officer for Shopko. “In a challenging retail environment, we have had to make some very tough choices, but we are confident that by operating a smaller and more focused store footprint, we will be able to build a stronger Shopko that will better serve our customers, vendors, employees and other stakeholders through this process.”

In order to position the company for future success, Shopko has announced that it will be closing an additional 38 stores, relocating over 20 Optical centers to freestanding locations, and conducting an auction process for its pharmacy business. Throughout this process, all Shopko Optical centers and pharmacies remain open and continue to deliver the products and services to which its customers are accustomed. All other stores remain open as the company continues to optimize its store footprint.

Additionally, encouraged by the performance of the four freestanding Optical centers that opened in 2018, Shopko plans to continue to grow its optical business by opening additional freestanding locations during 2019.

Additional information is available on the company’s restructuring website at http://info.shopko.com or by clicking on the Restructuring link on www.Shopko.com. Court filings and other documents related to the court-supervised process are available at https://cases.primeclerk.com/shopko or by calling the company’s claims agent, Prime Clerk, at 844-205-7495 (toll-free in the U.S.) or +1-347-576-1550 (for parties outside the U.S.).

Kirkland & Ellis LLP is acting as the company’s legal counsel. BRG is serving as restructuring advisor and Houlihan Lokey is acting as financial advisor.

Waukon Shopko not listed in retail closings, but pharmacy will close upon auction finalization

The financial restructuring of Shopko will not result in the closing of the Waukon retail store location, according to information recently provided by Shopko Public Relations Coordinator Michelle Hansen and the list of store closings located online at info.shopko.com. However, the pharmacy location at the Waukon store will be part of the company-wide discontinuation of pharmacy services, according to information provided by Hansen.

That discontinuation of pharmacy services involved an auctioning off of the 146 Shopko pharmacies and their prescription files last week through a court-supervised process. Hansen advised that the timing of a pharmacy closing depends on when the buyer will take over the prescription files. “We cannot be certain how long this process will take, but we will continue to keep the restructuring website updated with further updates about pharmacy sales,” Hansen explained. “Leading into that process, our pharmacies will remain open and committed to serving our customers with the same goods and services that they expect.”

Hansen said current Shopko Pharmacy customers should be contacted by local pharmacy staff regarding the closing, if they haven’t been already. Further information on Shopko Pharmacy closings, including the purchaser of a closing pharmacy location’s prescription files, can be found online at info.shopko.com.
 

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