The Deal: Burlington to Raise $200 million in IPO

NEW YORK ( The Deal ) -- There's a bright spot in the recent tales of department store woes, and that's the turnaround of a retailer all but written off during the recession: Burlington Stores .

The discount store chain, which is based in the New Jersey town that gave the company its name, set the terms for its initial public offering Sept. 19, saying in a regulatory filing that it plans to offer about 13.3 million shares of its common stock at a price range of $14 to $16 per share.

At the midpoint of that range, the company would raise nearly $200 million, bringing the retailer's market cap to nearly $1.1 billion. That's doesn't include the underwriter's option to buy another two million shares.

Burlington expects to use proceeds of nearly $182 million toward paying off about $171 million in debt. As of Aug. 3, the company had nearly $1.7 billion in long-term debt and about $33 million in cash and cash equivalents, giving the retailer an enterprise value of about $2.8 billion.

A successful IPO could eventually mean a hefty payout to private equity backer Bain Capital , which acquired the company in 2006 for $2.06 billion, including a small amount of debt.

The firm has already made back its investments after it sunk $470 million into the leveraged buyout and was paid $600 million in dividends.

If the underwriters' exercise their option in full, the private equity firm's 93.3% stake for about 54.4 million shares will become 73.7%. At the midpoint of the price range, that would give Bain an additional unrealized gain of $816 million.

That would bring Bain's total gain, unrealized and realized, to $1.4 billion or nearly 3 times its original investment.

Burlington wasn't always looking like such a smart investment for the private equity firm, however.

The department store, originally known for its discount coat lines, was badly hurt in the recession. In January 2009, Moody's Investor Service downgraded Burlington from B2 to B3, citing weak second-quarter earnings and lower than expected holiday sales. By the third quarter of that year, Bain had written down its investment to $157 million, or 0.6% of its cost, according to a report to its limited partnerships obtained by Reuters.

But by 2010, under CEO Thomas Kingsbury's leadership - he came in 2008 from heading up store operations at competitor Kohl's - Burlington fine-tuned its merchandising strategy to make consumers aware it sold not just coats, but apparel and home furnishings as well.

His success has been such that his name has come up when potential turnaround executives for J.C. Penney   and Sears Holding Corp. have been discussed, industry insiders said.

Burlington's same-store sales turned positive for three straight quarters in 2010, according to regulatory filings.