By Christine Kern, contributing writer
Plans include shuttering several hundred stores as part of reorganization .
Discount shoe retailer Payless Inc. is reportedly preparing to file for Chapter 11 bankruptcy in an effort to reorganize and save its struggling operations, Bloomberg reported. Initially, the plan calls for the closure of some 400 to 500 stores, anonymous sources told Bloomberg, though the deliberations are not public. Earlier plans indicated the closure of as many as 1,000 locations, and that number could still be in flux, sources reported.
Payless was bought three years ago by private equity firms Blum Capital and Golden Gate after they and footwear company Wolverine took its parent company, Collective Brands, private. Wolverine now runs the Sperry Top-Sider, Stride Rite and Keds brands as a result of that deal.
Payless’s outstanding $520 million senior debt is quoted around 52 cents on the dollar, and its $145 million junior loan is quoted at some 16 cents on the dollar, sources told Reuters in January. Portions of those loans went to pay out a dividend to Blum Capital and Golden Gate, according to that report. In January, Reuters reported that Payless was trying to restructure about approximately $665 million in debt, an enormous burden for such a small company. Moody’s Investors Service in February cut the retailer’s rating and outlook, based on its declining performance and debt pressure.
"I recognize that we have to deliver omnichannel capabilities with a sense of urgency," Payless CEO Paul Jones told Footwear News. "Almost every IT (internet technology) capital project underway at Payless relates to some sort of capability that the project will unlock for us."
Payless operates more than 4,000 stores across 30 countries, and employs almost 22,000 individuals.
Payless is not the only retailer struggling to stay afloat. American apparel, Aeropostale, Wet Seal, PacSun, and The Sport Authority have all filed for bankruptcy protection in the past two years, and Sears Holdings has also recently admitted that there is “substantial doubt” it will be able to stay in business.