Dive Brief:

• Bon-Ton Stores has negotiated a bid from a group of investors that would keep the department store retailer alive and operating, according to a press release. The group, made up of financial firm DW Partners as well as real estate firms Namdar Realty Group and Washington Prime Group, has signed a letter of intent proposing a going-concern acquisition of Bon-Ton, which filed for Chapter 11 in February.
• According to the letter, the bid would offer no less than $128 million in cash and would include "substantially all" of Bon-Ton's assets. Last week, the court also cleared the way for a group of Bon-Ton bondholders to submit a bid that would wind down the company and liquidate its assets to pay off lenders.
• Earlier in April Bon-Ton announced that it was in talks with a potential bidder for a going-concern transaction to buy at least a part of the company out of bankruptcy. This week, the retailer extended the auction for its assets to April 16 to allow more time for due diligence, with court hearings to approve the winning bid to follow in April. Bon-Ton said it was working with the investor group to finalize a purchase agreement.

Dive Insight:

Bon-Ton has been working — with a legal clock ticking in the background — to avoid liquidation, which historically has been the most common fate for retailers in bankruptcy.

The bid from DW, Namdar and Washington would preserve the department store retailer, which has a history stretching back to the 1800s and went into bankruptcy largely owned and controlled by its founding family. Before filing for Chapter 11, the company operated some 260 stores under the banners Bon-Ton, Bergner's, Boston Store, Carson's, Elder-Beerman, Herberger's and Younkers.

Reuters, which reported last week that Namdar and Washington were negotiating a bid to buy Bon-Ton out of bankruptcy, noted that the department store retailer is a major tenant for both mall owners. Bon-Ton's survival "would help protect the value of these malls," unnamed sources told Reuters.

At the same time, some bondholders want the retailer to liquidate, as they see a full business wind-down as the only viable path to repayment of the debt Bon-Ton owes them. In a February filing, the group of second lien bondholders said that Bon-Ton's "survival is, at best, uncertain and in reality, unlikely."

In an added twist, the bondholders, together with liquidator Great American Group, said through an attorney at a March hearing that they plan to make their own bid for Bon-Ton, worth hundreds of millions of dollars, to liquidate the company.

Bon-Ton's prospects for attracting an acquirer interested in preserving its business have likely brightened since filing, according to Philip Emma, a retail analyst with Debtwire. "If you're buying out of bankruptcy, you can buy a cleaner business," Emma told Retail Dive in March. That's especially true for retailers, which typically shed unprofitable stores during a Chapter 11 process that allows them to exit leases more quickly and cheaply than they could otherwise, Emma pointed out.

If the investors' bid falls through, perhaps losing to the second lienholders' liquidation bid, or can't win court approval, Bon-Ton might yet be forced to wind down. If that were the case, it would be the first department store chain to fully liquidate in years, according to S&P Global.