The Franchise Group is planning to borrow more than $2 billion from Apollo Global Management to finance the $8 billion deal for Kohl’s, sources close to the situation said.

The owners of the relatively tiny Vitamin Shoppe chain were the surprise winners in the lackluster auction for the struggling retail giant with a bid of $60 a share. They are in exclusive talks with Kohl’s and still need to get financing commitments before signing a merger agreement.

Kohl’s, which turned down a $9 billion offer at the start of the year, did not get any higher bids after putting itself up for sale in an auction pushed by activist investor Macellum Capital Management.

The buyer plans to sell Kohl’s real estate and then lease it back to the department store chain to fund most of the transaction but also needs financing against the actual retailer.

That is where lender Apollo and not a traditional bank enters as Franchise Group’s window for exclusive talks with the Wisconsin-based retailer closes in less than three weeks.

Apollo is considering lending money to fund the buyout at less than three times Kohl’s Earnings before Interest, Taxes, Depreciation and Amortization (Ebitda), the source said.  

In normal times, that would not be considered a risky loan, but with discretionary spending plunging because of decades-high inflation funding has dried up.

“A bank when this auction started [in January] would have lent money in the three times area,” a lender close to the auction said. “But now the best would be 1.5 times to two times.”

“The lending market for retailers is basically shut.”

Retail expert Jan Rogers Kniffen told The Post: “We haven’t seen inflation like this in 40 years and consumers will ultimately get pinched,” though they have not been so much yet because of the strong jobs market.

“Banks live in the future world they think will occur.”

Apollo is either being advantageous or pretty stupid, a source said.

Apollo did not comment when reached by The Post.

Franchise Group’s plans to sell off real estate to pay for the deal goes against the wishes of Wisconsin Senator Tammy Baldwin, who sent a letter to Kohl’s on March 24 saying this kind of buyout will put the local store’s workers at risk and put the company in debt, according to CNBC.

“I ask that you carefully consider each proposal’s long-term strategy and reject any offers that propose a sale-leaseback, increase the risk of bankruptcy, or imperil the jobs and retirement security of thousands of Wisconsin workers,” said Baldwin in the letter.

In the 2008-09 recession, 45 percent of retailers that went into bankruptcy did not emerge and went out of business, while that is true for only 20 percent of companies in other industries, Kniffen said.

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