CHICAGO (Reuters) - Discount footwear retailer Payless ShoeSource said it had filed for Chapter 11 protection on Tuesday with a plan to restructure debt and immediately close 400 underperforming stores in the United States and Puerto Rico.
Privately owned Payless Inc [WBPSSC.UL] joins a long list of U.S. brick-and-mortar retailers to fall victim to declining mall traffic in the midst of a rise of internet shopping and rapidly changing consumer tastes.
"This is a difficult, but necessary, decision driven by the continued challenges of the retail environment, which will only intensify," Payless Chief Executive Officer W. Paul Jones said in a statement.
The Topeka, Kansas-based company listed assets in the range of $500 million to $1 billion and liabilities of $1 billion to $10 billion in a filing with U.S. Bankruptcy Court in St. Louis.
Payless, with 4,400 stores in more than 30 countries, said it had reached an agreement with two-thirds of its top lenders to cut its debt by 50 percent.
Existing lenders have agreed to provide up to $385 million in debtor-in-possession financing, allowing Payless to remain in business and pay its bills throughout the Chapter 11 process.
The company said that an $80 million new term-loan financing will allow it to emerge from Chapter 11 "well positioned for future growth and profitability post-restructuring."
Following the store closures, Payless said it will "aggressively manage" its remaining real estate lease portfolio, while looking to invest in growth areas and expand in international markets such as Latin America.
Large department store chains such as Macy's Inc (M.N), Sears Holding Corp (SHLD.O) and J.C. Penney Company Inc (JCP.N) have been implementing turnaround plans that include cost-cutting and hundreds of store closures across the United States.
Among online shoe retailers, Amazon.com Inc (AMZN.O) bought Zappos.com in 2009 for nearly $1 billion in a push to expand in the growing online apparel arena.
Reporting by Tracy Rucinski; Editing by Lisa Shumaker