Payless institutes third round of store closures in less than one month

By

Rebecca Taras

Published
Jun 29, 2017

Less than one month after discount shoe retailer Payless Holdings LLC went through its second phase of store closings (389 stores) comes the announcement that the company received permission from the Missouri bankruptcy court to close an additional 408 locations—though court documents indicate the actual number only ended up being 216.

Despite being in a non-favorable position when the company filed for bankruptcy in April (a burden of $1 billion-plus in liabilities with only between $500 million and $1 billion in assets), Payless LLC attempted to remain positive by saying it could possibly close fewer stores depending on negotiations with property owners - but this was not the outcome. At this time, the struggling retailer expressed to the court that negotiations with landlords in possession of leases were not turning out to be as successful as they had hoped.

The third list of store closings for 81 stores (located nationwide) was granted on Tuesday by U.S. Bankruptcy Judge Kathy Surratt-States, a necessary move for the company in an effort to avoid irreparable harm. Payless cherry picked these locations due to variables such as cash flow, profitability and the unlikelihood of rent concessions.

In terms of attempting to get Payless back on track, Payless’ April filings indicated that two-thirds of first- and second-lien lenders are on board with a restructuring support agreement to the tune of potential access to $385 million in debtor-in-possession financing comprised of $305 million secured by assets and $80 million in new term loans.