When Payless ShoeSource emerged from bankruptcy protection in August 2017, the national discount footwear company vowed to reinvent itself. But today the retailer and a hedge fund that controls it are locked in a contentious battle over its second turn through bankruptcy, USA Today reported. In February, just a year-and-a-half after its first chapter 11 reorganization case, Payless landed back in bankruptcy court — this time wiping a decades-old retailer off the map in the U.S. and Canada. The turn of events has destined an estimated 16,000 workers for unemployment and disappointed consumers who relied on the chain's 2,500 stores and website for affordable shoes, boots and sandals. The company intends to keep Payless' overseas operations running. Some of the chain's lenders and creditors claim the collapse may stem in part from self-inflicted causes. They cite the role of Alden Global Capital, a prominent hedge fund that is Payless’ majority shareholder as well as a major lender. Critics maintain Alden has invested in distressed companies and then in some cases installed unseasoned executives who cut costs and sold assets while failing to take steps needed for successful corporate turnarounds. Some Payless creditors and lenders also have raised questions about what they characterized as conflicts of interest between Alden and Payless. After hearing Alden-focused court arguments last Wednesday in St. Louis, Missouri, Chief Judge Kathy Surratt-States of the Eastern District of Missouri ordered anti-conflict-of-interest measures to ensure that Payless creditors and lenders receive equal treatment with the hedge fund. The provisions include the unusual appointment of a monitor to oversee the five-seat Payless board, three with Alden ties, including Heath Freeman, the hedge fund president.
