Bankruptcy judge gives Payless Cashways green light to close 29 stores
KANSAS CITY, Mo. (AP) _ U.S. Bankruptcy Judge Frank Koger has approved a request from Payless Cashways Inc. to close 29 stores as part of its effort to reorganize.
Payless filed for Chapter 11 bankruptcy protection late last month after struggling to compete while weighed down with more than $650 million in debt left over from a 1988 management-led buyout.
Koger approved the store closings Wednesday, then presided over a bidding war featuring liquidation firms that sought a contract to close 23 of the stores, all of them in markets which Payless intends to leave, including Boston and Houston.
The other six stores, being closed by Payless itself, are in markets where the Kansas City-based home improvement retailer will continue to operate if its reorganization is successful.
The liquidation of inventory will begin in the next week or so and will take 45 to 60 days. Liquidation of the real estate is expected to occur over a three-year period.
Payless expects to realize about $35 million on the sale of inventory and $39 million on the sale of the real estate. In addition, the closings will reduce the annual payroll, including benefits, by about $45 million.
Proceeds from the closings will go to Payless’ banks, which was a condition of those banks providing the retailer with $125 million in debtor-in-possession financing to enable it to keep operating during the attempt to reorganize.
While Payless at one time thought it might be able to sell some of the stores, company President Susan Stanton testified Wednesday that the retailer, through its adviser, Houlihan Lokey Howard & Zukin, had received only a small number of inquiries, none of them fruitful.