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Payless to cut 2,000 jobs
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July 21, 1997: 12:46 p.m. ET
Building-materials chain, filing for Chapter 11, plans to close 29 stores
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NEW YORK (CNNfn) - Building-materials chain Payless Cashways Inc. filed for Chapter 11 bankruptcy protection Monday, announcing plans to close 29 stores and eliminate some 2,000 jobs.
Payless Chairman David Stanley said his company sought bankruptcy protection because the Kansas City, Mo.-based chain "has operated with an extremely burdensome level of debt, which has limited capital expenditures during a period of unprecedented competitive pressure."
Plans call for Payless to eliminate about 1,900 jobs at stores set for closure. The chain also plans to cut some 100 positions at the company's headquarters and regional administrative centers.
All told, the cuts represent about 12 percent of Payless' current 17,000-person work force.
Despite the planned downsizing, Payless intends to continue operating 165 other stores while seeking creditor support for a reorganization plan the company unveiled Monday.
Payless said the reorganization plan already has approval from the chain's lenders.
The company also said a banking group led by Canadian Imperial Bank of Commerce has already agreed to $125 million in debtor-in-possession financing to allow Payless to meet its obligations while in Chapter 11.
A group of lenders has also agreed to write a $150 million loan once Payless completes its reorganization.
Ironically, Payless has actually made a profit so far this year in terms of earnings before interest, taxes, depreciation and amortization (EBITDA).
In its second quarter ended May 31, Payless earned $28.2 million in EBITDA terms on $661.2 million of sales, although both figures were lower than the previous fiscal year's second-quarter results.
Yet Payless said Monday that despite the positive EBITDA results, the chain would not likely manage to service its debt by the current fiscal year's end.
Payless currently operates 194 building-materials stores for residential, commercial and do-it-yourself builders, mainly in New England and the western United States.
The chain operates stores under the names Payless Cashways, Furrow, Lumberjack, Hugh M. Woods, Somerville Lumber and Knox Lumber. 
-- Randy Schultz
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Payless Cashways
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