Lawyers for creditors of Payless ShoeSource Inc. blasted the hedge fund that took control of the troubled retailer after its first bankruptcy, saying it drove the company back into chapter 11 less than two years later, WSJ Pro Bankruptcy reported. Creditors took aim at Alden Global Capital during a Tuesday court hearing, alleging Payless was the victim of a series of insider transactions designed to benefit the hedge fund at their expense. “During this time [under Alden’s control], the business burned a substantial amount of capital and deteriorated from the reorganized company that it was when it emerged from bankruptcy to the chapter 22 filer that it is today, where its North American operations are liquidating,” attorney Stephen Zide said in court. Payless sought chapter 11 protection on Monday, the retailer’s second trip through bankruptcy in less than two years. As part of its first restructuring, a group of lenders, including Alden, converted their debt into equity for a 91 percent stake in the reorganized shoe seller. Although Alden was a minority holder at the time of the chain’s exit from the first bankruptcy, it has since increased its position to 66.5 percent as of the Monday bankruptcy filing, court papers show.
