NEW YORK, August 11, 2017 – King & Spalding represented the Ad Hoc Committee of First Lien Term Loan Lenders in connection with the successful restructuring of Payless ShoeSource through a confirmed plan of reorganization in Payless’ Chapter 11 bankruptcy cases.
As part of its representation, King & Spalding advised the Ad Hoc Committee of First Lien Term Loan Lenders – a group that collectively held approximately 69% of Payless’ $506 million prepetition First Lien Term Loan Facility and 37% of Payless’ prepetition Second Lien Term Loan Facility – in connection with backstopping an $80 million term debtor-in-possession financing facility, negotiating and entering into a restructuring support agreement that served as the framework for Payless’ Chapter 11 plan of reorganization, leading negotiations with Payless’ prepetition sponsors and the official committee of unsecured creditors, which resulted in a global settlement resolving all major contested plan confirmation issues, and negotiating and documenting Payless’ exit financing and corporate governance agreements.
The restructuring was completed in the U.S. Bankruptcy Court for the Eastern District of Missouri and resulted in the company eliminating in excess of $435 million in funded debt, a reduction of the company’s brick-and-mortar footprint by approximately 700 stores, and the First Lien Term Loan Lenders receiving most of the equity and $200 million in take-back term debt of reorganized Payless. The First Lien Term Loan Lenders who provided the term debtor-in-possession financing facility also agreed to convert their debtor-in-possession term loans into an $80 million first-out tranche of reorganized Payless’ term exit financing facility. These results are even more notable given the increasingly turbulent world of retail bankruptcies, where a successful emergence from Chapter 11 is the exception rather than the rule.
More information on the Chapter 11 case can be found here.
The King & Spalding team on the matter was led by restructuring partners Mike Rupe, Jeff Pawlitz and Austin Jowers, working with counsel Christopher Boies and associates Michael Handler and Elizabeth Dechant.
Partners Arthur Steinberg and David Fine provided litigation-related advice alongside associate Emily Chen while the finance team advising the Ad Hoc Committee was led by finance partner Ellen Snare and included associates Samantha Gleit, Martin Eid and Eugene Pevzner. Other lawyers involved included tax partners John Sweet and John Taylor, partner Carrie Ratliff for equity and corporate governance issues and partner Kenneth Raskin and counsel Mark Kelly on employee benefit-related issues.
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