NBC Acquisition Corp., parent company of Nebraska Book Company, the country’s third largest operator of college bookstores as well as a major wholesaler of college texts, filed for Chapter 11 bankruptcy protection Monday morning in what it says is part of a plan to recapitalize its debt.
According to its filing, the December 31 maturity of a $200 million loan has raised concerns among some publishers about NBC’s ability to finance its back to school textbook and merchandise purchases, and the company was unable to reach a refinancing agreement with all of its lenders without filing for Chapter 11. Under the pre-arranged bankruptcy filing, NBC said it has reached a Restructuring and Support Agreement with its lenders that proposes removing approximately $150 million in debt from Nebraska’s prepetition balance sheet while paying general unsecured creditors in full. As part of the plan Nebraska has obtained commitments for $200 million debtor-in-possession financing facility. Nebraska Book Company has two bond debts to BNY Midwest Trust Company totaling more than $258.6 million; its largest publishing creditors are Pearson Education, for which it owes, $4.9 million, and Cengage Learning, owed $2 million. Altogther the trade debt for the top 28 unsecured creditors totals roughly $10.5 million.
In a statement, NBC said it expected little or no impact on in its regular course of business during the Chapter 11 proceedings.
According to court papers, as of December 31, 2010, Nebraska had approximately $657.2 million in total assets and approximately $564 million in total liabilities. Today it has approximately $450 million in indebtedness and related obligations. Sales in the fiscal year ended March 31, 2011 were $598 million, down slightly from $605.5 million in fiscal 2010.
The company acknowledged that changes in student buying behavior, specifically the move to online retailers and more recently online rental providers, have hurt its core business with EBITDA from its off-campus stores peaking at $36 million in 2008, but falling to $19 million in 2011.
NBC said it has invested in programs to make it the "go-to" source for all textbook and college merchandise, including aggressively growing its online presence and textbook rental businesses to better fit student buying habits. In particular, NBC is implementing a new "Rent Every Book" model that capitalizes on its physical locations (about 280 stores), supply of used books, and pricing knowledge. NBC has also launched Neebo.com, a proprietary branded website that combines the sites of 280 individual store websites into a single site and permits NBC to have a presence in the online marketplace without paying third-party transaction costs. Combining Rent Every Book and Neebo.com will permit NBC to offer students “the products they want, across every medium through which they shop for textbooks, at a competitive price point,” the filing said. In addition, NBC plans to continue expanding its on-campus stores and improve their general merchandise assortment and merchandising through the on- and off-campus stores and Neebo.com.