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Payless, the privately owned purveyor of budget-friendly shoes, has become the latest retail chain to file for bankruptcy, citing the turbulence that has beset the broader industry.

The St Louis-based company — which is owned by private-equity firms Golden Gate Capital and Blum Capital Partners — filed a petition for Chapter 11 on Tuesday in the US Bankruptcy Court for the Eastern District of Missouri, citing assets between $500m-$1bn and estimating liabilities in the range of $1bn-$10bn.

It said that it will immediately close nearly 400 underperforming locations in the US and Puerto Rico while it restructures its debt load and strengthens its balance sheet, and plans to focus on investing in specific areas it believes will yield sustainable growth, including expansion in Latin America and other international markets and expanding omnichannel options.

Payless said that it had entered into an agreement with parties controlling approximately two-thirds of its first- and second-lien debt to cut its debt load by nearly 50 per cent and access “significant additional capital” as it attempts to quickly exit Chapter 11 protection.

“This is a difficult, but necessary, decision driven by the continued challenges of the retail environment, which will only intensify,” Payless chief executive W. Paul Jones said in a statement. “While we have had to make many tough choices, we appreciate the substantial support we have received from our lenders, who share our belief that we have a unique opportunity to enable Payless — the iconic American footwear retailer with one of the best-recognized global brands — to remain the go-to shoe store for customers in America and around the globe.”

Payless said it has secured $385m in debtor-in-possession financing, that will allow it to tap up to $120m in incremental liquidity during the bankruptcy. In addition to the US Chapter 11 proceedings — which include Payless’ North American entities, along with two Hong Kong-based entities — it is also seeking recognition of those proceedings in Ontario court. The company will remain in business during the proceedings, it said.

Numerous retailers that relied for years on mall traffic have fallen into bankruptcy recently, as digital rivals gain ground. In January, women’s apparel chain Limited Stores Co sought Chapter 11 protection, while Wet Seal, another mall retailer catering to teens, also entered bankruptcy in February.

Copyright The Financial Times Limited 2017. All rights reserved.
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