Discount retailer Payless ShoeSource is investigating whether its leveraged buyout by private equity firms and the dividend payments they received led to its bankruptcy, according to court papers, Reuters reported yesterday. The company disclosed its investigation on Wednesday in a filing aimed at persuading Bankruptcy Judge Kathy Surratt-States in St. Louis to reject a request by an official committee of creditors to hire an expert to review pre-bankruptcy transactions. Creditors have said in court filings that San Francisco private equity funds Golden Gate Capital and Blum Capital, which together hold 98.5 percent of the company and control its board, received more than $350 million in dividends in recent years. Payless, which has 4,000 stores around the world, said in court papers that a separate investigation could hinder its goal to recapitalize and emerge from bankruptcy in August.
