US footwear chain Payless explores debt restructuring
NEW YORK — US 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.
Kirkland & Ellis, Payless and its private equity owners, Blum Capital Partners and Golden Gate Capital all 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 seller 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 Wolverine took over a group in Collective that included the Sperry Top- Sider, Stride Rite and Keds brands. —