Shoe Seller To File For Bankruptcy
BIRMINGHAM, Ala. (Reuters) - Athletic footwear chain Just For Feet Inc (Nasdaq:FEET - news). said Tuesday that it agreed to restructure its debt and file for Chapter 11 bankruptcy, in a sign that selling sneakers remains a tough business.
Birmingham, Ala.-based Just For Feet reached an agreement with a majority of holders of its $200 million 11 percent senior subordinated notes due 2009 for the restructuring.
The noteholders, who did not receive a Nov. 1 interest payment, would gain control of 100 percent of the reorganized company's stock after it emerges from bankruptcy, Just For Feet said. The majority of noteholders agreed not to take action against the company under the agreement.
Under the proposed restructuring, the company's existing common stock would be canceled and shareholders would get warrants to buy up to 10 percent of new common stock on a diluted basis in the reorganized company.
Noteholders have agreed to support payment of trade claims under the restructuring.
The warrants would only provide value to existing holders if the new common stock appreciated enough to satisfy claims, including those of noteholders, the company said. Management will also get warrants as an incentive, the company said.
Chief Executive Officer Helen Rockey said the agreement will cut the company's overall indebtedness by 50 percent and ``will allow the company to aggressively pursue its operational turnaround.
Just For Feet shares ended 1998 at 17-3/8, but the stock has now fallen to less than 2.
Venator Group Inc (NYSE:Z - news)., the parent of Foot Locker and Champs Sports, and Sports Authority Inc. have struggled in recent years as fashion moved away from high-priced basketball sneakers to boots and brown shoes or running sneakers.
This fashion move led to a glut of unsold shoes two years ago that clogged inventories and led to heavy discounts that hurt profitability at retailers.
The reorganization is subject to bankruptcy court approval. |
