Shoe Chain Payless Enters Bankruptcy With Debt-Cut Deal
Payless, Shoe Retailer, Files for Bankruptcy in St. Louis
(Bloomberg) -- Payless Inc., the discount shoe seller, filed for bankruptcy with a plan to slash debt by almost 50 percent as the retail spiral persists.
Payless listed liabilities of $1 billion to $10 billion in Chapter 11 documents filed Tuesday in St. Louis bankruptcy court. The chain said in a statement that its restructuring proposal has the support of investors holding about two-thirds of its first-lien and second-lien term debt. The agreement, if carried out, will reduce interest costs and give the company access to capital, according to the statement.
Under the plan, Payless will immediately close about 400 underperforming stores in the U.S. and Puerto Rico.
“This is a difficult, but necessary, decision driven by the continued challenges of the retail environment, which will only intensify,” Chief Executive Officer W. Paul Jones said in the statement.
Changing Times
U.S. retailers have been trying to navigate changing consumer habits, including a shift to online shopping and fewer visits to the mall. In the past year, American Apparel and Limited Stores have begun shutting down retail operations, while dressmaker BCBG Max Azria and Gordmans Stores filed for bankruptcy with plans to auction their assets. Even a behemoth like Sears Holdings Corp. has warned investors that its prospects to continue as a going concern are dimming.
Payless has a $520 million term loan due in 2021 and a $145 million loan maturing the following year, according to data compiled by Bloomberg. Moody’s Investors Service and S&P Global both downgraded the company’s debt in February because of falling revenue and mounting obligations. The company said it will seek approval of as much as $385 million of debtor-in-possession financing from certain existing lenders.
Payless opened its first store in 1956 in Topeka, offering low prices and customer self-service. The chain has been owned by private-equity firms Golden Gate Capital and Blum Capital Partners since a 2012 buyout, part of the split of publicly traded Collective Brands Inc.
The case is In re Payless ShoeSource Inc., 17-42257, U.S. Bankruptcy Court, Eastern District of Missouri (St. Louis).
--With assistance from Lauren Coleman-Lochner and Jodi Xu Klein
To contact the reporters on this story: Dawn McCarty in Wilmington, Delaware at dmccarty@bloomberg.net, Nico Grant in New York at ngrant20@bloomberg.net.
To contact the editors responsible for this story: Christopher DeReza at cdereza1@bloomberg.net, Andrew Dunn, Faris Khan