Payless ShoeSource Inc.’s reorganization plan won court approval on Monday, moving the discount shoe retailer closer to exiting bankruptcy protection, The Wall Street Journal reported yesterday. The plan will allow Payless to eliminate 40 percent of its $838 million in funded debt from its balance sheet by giving lenders equity stakes in the company in exchange for debt forgiveness. Senior lenders, owed $506 million, will share in a 91 percent equity stake in the reorganized company, while junior lenders owed $145 million, are slated to take the remaining 9 percent stake. The nation’s largest footwear retailer, Payless sought bankruptcy protection in April. Unlike its competitors, Payless has closed only a portion of its 4,400 locations. Since the outset of the bankruptcy filing, Payless has planned to exit bankruptcy protection by August. The company will now be under the control of its senior and junior lenders.
