Shoe chain Payless explores debt restructuring -sources

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By Lauren Hirsch and Jessica DiNapoli

<span class="articleLocation”>U.S. discount footwear retailer Payless Inc is
working with debt-restructuring attorneys to deal with its
approximately $665 million in debt as foot traffic at its stores
declines, according to people familiar with the matter.

The move underscores the stress facing many retailers as
consumers do more of their shopping online. Other iconic chains,
including apparel label J. Crew Group Inc and accessories chain
Claire’s Stores Inc, have started to look for ways to address
their debt loads as their sales shrink.

Payless is working with law firm Kirkland & Ellis LLP as a
debt restructuring adviser, the people said this week. The
company is considering several options to deal with its debt,
the people added, asking not to be identified because the matter
is confidential.

Payless and one of its private equity owners, Blum Capital
Partners, declined comment while the other owner, Golden Gate
Capital, did not immediately respond to a request for comment. A
Kirkland & Ellis spokesman declined to comment.

Headquartered in Topeka, Kansas, Payless has about 4,400
stores around the world. It has 3,600 company-owned stores in
North America, and franchises in Africa, Asia and the Middle
East.

The company has suffered as off-price competitors, including
TJX Companies Inc, the parent company of T.J. Maxx, and
shoe warehouse DSW Inc, have eaten into its business.

The stress facing the shoe eller is reflected in the trading
price of its debt, which is far below face value. Its $520
million senior loan is being quoted at about 52 cents on the
dollar, and its $145 million junior loan is being quoted at
about 16 cents on the dollar, according to sources.

Some of that debt was used to pay a dividend to the
company’s equity owners, Blum Capital and Golden Gate.

Blum, Golden Gate and Wolverine World Wide Inc took
Payless’ former parent, Collective Brands Inc., private in 2012
in a deal valued at about $2 billion. Blum and Golden Gate kept
Payless, while Wolverwine took over a group in Collective that
included the Sperry Top-Sider, Stride Rite and Keds brands. (additional reporting from Kristen Haunss)



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