Shopping Center Business

MAY 2017

Shopping Center Business is the leading monthly business magazine for the retail real estate industry.

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36 • SHOPPING CENTER BUSINESS • May 2017 NEWSLINE PAYLESS SHOESOURCE FILES FOR BANKRUPTCY, PLANS TO CLOSE 400 STORES P ayless ShoeSource has filed for Chap- ter 11 bankruptcy and announced plans to immediately close nearly 400 underperforming stores. The company, which bills itself as the largest specialty family footwear retail- er in the Western Hemisphere, currently operates approximately 4,400 stores in more than 30 countries. The shoes and accessory retailer was founded in 1956 in Topeka, Kansas. "This is a difficult, but necessary, deci- sion driven by the continued challenges of the retail environment, which will only intensify," says W. Paul Jones, the company's CEO. "We will build a stron- ger Payless." Payless has entered into a Plan Sup- port Agreement (PSA) with its lenders to reduce its debt load by almost 50 percent. The plan will also allow Payless to lower its annual cash interest costs, access additional capital and provide a path to emergence from Chapter 11 with a sustainable capital structure. The agreement will also allow Payless to in- vest in areas that may provide further growth, including omnichannel expan- sion, product and inventory initiatives, and international expansion in Latin America and elsewhere. The company plans to optimize its store footprint through the immediate store closures, as well as managing its existing real estate lease portfolio. This may include modifying terms or consid- ering closures of additional locations. Payless has negotiated agreements with some of its existing lenders to pro- vide the company up to $385 million of debtor-in-possession financing. This includes access to $305 million of as- set-based financing and up to $80 mil- lion of new term loan financing. Many brick-and-mortar retailers are struggling with the continued shift in the playing field, driven mostly by the expansion of e-commerce. Payless is the 10th retailer to file for Chapter 11 bankruptcy so far this year, according to CNBC. Others include Gander Moun- tain, BCBG Max Azria, Wet Seal, Limit- ed Stores, Gordmans Stores, HHGregg, Eastern Outfitters, RadioShack, Gener- al Wireless Operations and Michigan Sporting Goods Distributors. Aeropostale also closed nearly 600 locations in 2016, while Sports Author- ity gave back 460 storefronts after its liquidation. Further store closures are being undertaken by Macy's, JC Penney and Sears. Payless has retained Kirkland & Ellis as its legal advisor; Guggenheim Securi- ties as its investment banker and finan- cial advisor; and Alvarez & Marsal as its restructuring advisor. The company has also tapped RCS Real Estate Advisors to market 425 store leases in conjunction with the compa- ny's Chapter 11 filing. — Nellie Day

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