Shoe retailer Payless voluntarily filed for relief under Chapter 11 of the Bankruptcy Code for the second time in 18 months. Ankura Consulting Group will serve as the company’s restructuring advisor through this additional bankruptcy process.
Certain Payless Canadian subsidiaries will also be seeking protection pursuant to the Companies’ Creditors Arrangement Act in the Ontario Superior Court of Justice.
Payless intends to use these proceedings to facilitate a wind-down of its approximately 2,500 store locations in North America and its e-commerce operations. The company expects that store closings will begin at the end of March and many stores will remain open through the end of May, as it conducts liquidation sales in the U.S. and Canada. Payless has also wound down its e-commerce operations.
Payless’ retail operations outside of North America, including its company-owned stores in Latin America, are separate legal entities and are not included in the Chapter 11 or CCAA filings. Payless’ stores across 20 countries in Latin America, the U.S. Virgin Islands, Guam and Saipan and its international franchise stores in 16 countries across the Middle East, India, Indonesia, Indochina, Philippines and Africa, will continue operating business as usual in every respect.
Stephen Marotta, appointed in January 2019 to serve as chief restructuring officer of Payless, said, “We have worked diligently with our suppliers and other partners to best position Payless for the future amidst significant structural, operational, and market challenges. Despite these efforts, we now must wind down our North American retail operations. However, Payless’ profitable stores throughout Latin America and our international franchisees’ stores will continue to operate business as usual in every respect. As we move through the process, we will work to minimize the impact on our employees, customers, vendors and other stakeholders.
“The challenges facing retailers today are well documented, and unfortunately Payless emerged from its prior reorganization ill-equipped to survive in today’s retail environment. The prior proceedings left the company with too much remaining debt, too large a store footprint and a yet-to-be realized systems and corporate overhead structure consolidation. As a consequence, despite our substantial efforts, we were ultimately unable to operate the North American retail and e-commerce operations on a sustainable basis.”
The company will provide a more detailed update on plans for the wind-down of its North American retail operations as the court-supervised process progresses.
Payless is seeking customary initial relief from the U.S. Bankruptcy Court and Canadian Court, including authorization to support its operations during the process, authorization to continue payment of employee wages and maintain healthcare benefits and certain other relief customary in these circumstances. A similar request will be made in the Canadian court.
Akin Gump Strauss Hauer & Feld and Armstrong Teasdale will serve as the company’s American legal counsel, while Cassels Brock & Blackwell serves as Payless Canada’s counsel. PJ SOLOMON will serve as financial advisor and A&G Realty Partners as real estate consultant.
