Footstar requests substantive consolidation of Chapter 11 cases

By Caroline Salls

Pittsburgh, Sept. 7 - Footstar, Inc. requested a substantive consolidation of its Chapter 11 bankruptcy case Wednesday with the U.S. Bankruptcy Court for the Southern District of New York.

According to the motion, the consolidation plan will reduce the substantial costs associated with the administration of about 2,500 estates, reduce the quarterly fees payable on behalf of every subsidiary to the U.S. Trustee and enable Footstar to preserve value for all interested parties.

"Because the debtors, the creditors' committee and the equity committee believe the plan will provide for full payment of creditors and a return to equity holders, [Footstar] does not believe creditors will receive less as a result of the proposed consolidation than it would receive absent the proposed consolidation, and equity holders will benefit as a result of the administrative fee savings," the motion said.

When Footstar filed for Chapter 11, its operations consisted of an athletic footwear and apparel segment and a discount and family footwear segment. Since then, the athletic segment has been sold and store closing sales have been held. Termination agreements have been reached in connection with the discount and family footwear segment.

Following extensive litigation, an agreement has also been approved with Kmart Corp. that Footstar expects will allow it to file a plan to reorganize around discount and family footwear debtor Meldisco.

A hearing is scheduled for Sept. 30.

West Nyack, N.Y.-based Footstar filed for bankruptcy on March 2, 2004. Its Chapter 11 case number is 04-22350.

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