Just For Feet Makes Last Stand
February 21, 2000
Bankrupt sneaker retailer Just For Feet Inc. is on its last legs.
The company does not have enough cash on hand to carry it through the quarter or even complete its Chapter 11 reorganization. And, by the end of March, its brand name and management team may also be gone.
Discount footwear retailer Footstar Inc. announced last week it plans to acquire the Just For Feet name, 79 of its superstores, 23 specialty retail stores, the company's Internet retail business, and its Birmingham, Ala. corporate headquarters.
Footstar will pay $69.7 million in cash for the assets and the assumption of certain merchandise letters of credit for $2.9 million. The deal is expected to be completed at the end of March.
Just For Feet's chief financial officer Armand Carrano, however, would not comment on whether his company would have any assets left once the transaction was complete. But even his outlook may carry little weight at this point.
A spokesperson for Footstar said that Just For Feet's management team may be ousted soon: "The company is looking at management on a position-by-position basis."
Still, neither company would say whether Footstar would also assume Just For Feet's debt liabilities.
Currently Just For Feet has one $200 million outstanding high yield issue that carries a Caa2 rating from Moody's Investors Service.
Since the company filed for Chapter 11 protection in November, its bonds have been trading at distressed levels.
Late in January, Just For Feet said that efforts to sell off the company had been unsuccessful and filed for Bankruptcy Court approval to sell all or certain parts of its assets in a court-approved auction. At the time of the announcement, the company said it had insufficient cash on hand to continue normal operations. Its common stock ceased trading on the Nasdaq earlier that month.
The current transaction will be financed through a secured bank facility. A new, three-year credit facility Footstar negotiated with FleetBoston Financial will replace the company's existing $300 million facility that expires in September. FleetBoston Robertson Stephens is the lead arranger on the deal. Merrill Lynch advised Footstar on the transaction.
New Jersey-based Footstar operates more than 500 footwear outlets in 45 States, Puerto Rico and the U.S. Virgin Islands. Its Meldisco division operates discount footwear departments in larger retail outlets, including Kmart. In 1999, the company reported sales of $1.88 billion.