After months of speculation, Payless ShoeSource has filed for Chapter 11 protection.
The largest specialty family-footwear retailer in the U.S. said today that it will immediately close nearly 400 underperforming stores in the U.S. and Puerto Rico as it seeks to restructure. The company’s North American entities, as well as two Hong Kong-based entities involved in logistics (CBL) and supply chain (DAL), are included in the company’s restructuring plan, which has been filed in the U.S. Bankruptcy Court for the Eastern District of Missouri in St. Louis. Payless said it has also filed for recognition of its U.S. Chapter 11 proceedings in courts in Ontario, Canada.
The company said it has inked a Plan Support Agreement with two-thirds of its first- and second-lien holders to reduce its debt load by nearly 50 percent, lower its interest costs and access “significant” additional capital to expedite its emergence from Chapter 11.
“This is a difficult but necessary decision driven by the continued challenges of the retail environment, which will only intensify,” Payless CEO Paul Jones said in a statement. “We will build a stronger Payless for our customers, vendors and suppliers, associates, business partners and other stakeholders through this process.”
He added, “While we have had to make many tough choices, we appreciate the substantial support we have received from our lenders, who share our belief that we have a unique opportunity to enable Payless to remain the go-to shoe store for customers in America and around the globe.”
Payless said it has negotiated agreements with some of its existing lenders for access to as much as $385 million of debtor-in-possession financing, which includes access to $305 million of ABL financing and up to $80 million of new term loan financing.
“We are confident that this process will also enable us to leverage Payless’s existing strengths to succeed,” Jones said.
Payless said it will continue to operate its business in the ordinary course in terms of its customers, vendors, partners and employees as it seeks immediate relief from the court, including authority to pay pre-filing wages, salaries, benefits, honor customer programs, and pay vendors/suppliers for all goods and services provided on or after the filing date.
Payless, founded in 1956 in Topeka, Kan., has approximately 4,400 stores in more than 30 countries.
Footwear News reported in early March that the retailer would likely file Chapter 11 in April. For more on FN’s coverage of Payless’ financial challenges, click on the links below: