UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) May 31, 2005
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Footstar, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
1-11681 22-3439443
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(Commission File Number) (IRS Employer Identification No.)
933 MacArthur Boulevard
Mahwah New Jersey 07430
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(Address of Principal Executive Offices) (Zip Code)
(201) 934-2000
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. Entry into a Material Definitive Agreement.
As previously disclosed, on March 2, 2004, Footstar, Inc. (the
"Company") and substantially all of its subsidiaries (collectively, the
"Debtors") filed voluntary petitions under chapter 11 of title 11, United States
Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the
Southern District of New York (the "Court") (Case No. 04-22350 (ASH)) (the
"Chapter 11 Case"). The Debtors remain in possession of their assets and
properties, and continue to operate their businesses and manage their properties
as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy
Code.
As of May 31, 2005, the Company entered into the First Amendment (the
"Amendment") to the Amended and Restated Debtor-in-Possession and Exit Credit
Agreement, dated as of June 25, 2004 (the "Credit Agreement"), by and among the
Company, Footstar Corporation, Fleet National Bank, Fleet Retail Group, Inc.,
General Electric Capital Corporation, The CIT Group/Business Credit, Inc.,
AmSouth Bank and National City Business Credit, Inc. The effectiveness of the
Amendment is subject to the approval of the Court. The Amendment is attached
hereto as Exhibit 10.1 and incorporated herein by reference.
The Amendment, among other things, reflects the change in the
maturity date of the debtor-in-possession portion of the Credit Agreement from
the earlier of (a) March 4, 2006 and (b) fifteen days following confirmation of
the Company's plan of reorganization to the earlier of (c) October 31, 2006 and
(d) the Company's emergence from chapter 11. The maturity date of the exit
portion of the Credit Agreement is the earlier of (e) thirty-six months after
the Company's emergence from chapter 11 and (f) March 4, 2009. In addition, the
Amendment reflects the transfer of Wells Fargo Foothill LLC's interest as a
lender under the Credit Agreement and the reallocation of its lending commitment
among certain of the Company's lenders under the Credit Agreement. The Company's
availability under the Credit Agreement continues to be determined by a
borrowing base formula based upon accounts receivable and inventory and the
Company does not forecast the need or capacity for more than $100,000,000 of
exit financing. Accordingly, pursuant to the Amendment, commitments upon
emergence from chapter 11 have been reduced from up to $160,000,000 to up to
$100,000,000 at the Company's option and upon satisfaction of certain
conditions. In addition, as a result of the reduced size of the commitments
under the Credit Agreement, the amount of the letter of credit sub-limit has
been reduced from $75,000,000 to $40,000,000. Pursuant to the Amendment, the
Company is required to maintain minimum excess availability equal to at least
10% of the borrowing base under the Credit Agreement; provided, however, that
prior to the Company's emergence from chapter 11, if loans are outstanding under
the Credit Agreement the minimum excess availability requirement is an amount
equal to at least (i) 10% of the borrowing base under the Credit Agreement plus
(ii) $20,000,000. This amended minimum excess availability requirement replaces
the Company's obligation to maintain minimum excess availability equal to the
lesser of (i) 10% of the lending commitments under the Credit Agreement and (ii)
$13,000,0000.
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The number of store closings that constitutes an event of default
under the Credit Agreement has been increased pursuant to the Amendment from 10%
of the stores open as of March 4, 2004 to an annual amount equal to 15% of the
stores open on the first day of each year, provided that if more than 5% of the
stores close at any one time, the sales or dispositions of inventory at such
stores shall be on terms and conditions and for consideration reasonably
acceptable to the administrative agent under the Credit Agreement. The Amendment
also permits the Company to pay dividends and/or repurchase its common stock
without limitation, provided that the Company (i) is not in default under the
Credit Agreement, (ii) has excess availability of 40% or greater of the
borrowing base under the Credit Agreement on a pro forma basis for the following
twelve-month period, and (iii) delivers an officer's certificate to the agent
under the Credit Agreement that the Company is solvent both before and after
paying any such dividend and/or repurchasing common stock and that the fixed
charge coverage ratio for the four consecutive fiscal quarters most recently
ended prior to any such repurchase is greater than 1.10 to 1.00. The Amendment
also allows distributions of cash to unsecured creditors as contemplated by the
Company's plan of reorganization prior to emergence from chapter 11.
Additionally, pursuant to the Amendment, the Company has agreed to pay the
lenders under the Credit Agreement their $400,000 emergence fee upon the
effective date of the Amendment rather than upon emergence from chapter 11.
Cautionary Statement Regarding Forward-Looking Statements
This Current Report and the exhibit hereto may contain
forward-looking statements made in reliance upon the safe harbor provisions of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements may be identified
by their use of words, such as "anticipate," "estimates," "should," "expect,"
"guidance," "project," "intend," "plan," "believe" and other words and terms of
similar meaning. Factors that could affect the Company's forward-looking
statements include, among other things: the Company's ability to continue as a
going concern; its ability to operate pursuant to the terms of the Credit
Agreement; its ability to obtain Court approval and any other required approvals
with respect to motions in the Chapter 11 Case prosecuted by the Company from
time to time; its ability to develop, prosecute, confirm and consummate one or
more plans of reorganization with respect to the Chapter 11 Case; risks
associated with third parties seeking and obtaining Court approval to terminate
or shorten the exclusivity period that the Company has to propose and confirm
one or more plans of reorganization, to appoint a Chapter 11 trustee or to
convert the Chapter 11 Case to Chapter 7 case; its ability to obtain and
maintain normal terms with vendors and service providers; and the ability to
maintain contracts that are critical to the Company's operations; the audit of
2004 and the review of subsequent quarters by the Company's independent public
accountants; negative reactions from the Company's stockholders, creditors or
vendors to the results of the investigation and restatement or the delay in
providing financial information caused by the investigation and restatement and
the delisting of the Company's common stock from the New York Stock Exchange;
the impact and result of any litigation (including private litigation), any
action by the U.S. Securities and Exchange Commission (the "SEC") or any
investigation by any other governmental agency related to the Company or the
financial statement restatement process; additional delays in the filing of
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reports with the SEC; the Company's ability to manage its operations after the
financial statement restatement process; the results of the Company's
exploration of strategic alternatives; the Company's ability to successfully
implement internal controls and procedures that ensure timely, effective and
accurate financial reporting; the continued effect of Kmart store closings on
Meldisco; the outcome of Kmart's challenge to the Company's motion to assume the
Company's agreements with Kmart; higher than anticipated employee levels,
capital expenditures and operating expenses, including the Company's ability to
reduce overhead and rationalize assets, both generally and with respect to
changes being implemented to address the results of the investigation and the
restatement; adverse results on the Company's business relating to increased
review and scrutiny by regulatory authorities, media and others (including any
internal analyses) of financial reporting issues and practices or otherwise; any
adverse developments in existing commercial disputes or legal proceedings;
volatility of the Company's stock price; and intense competition in the markets
in which the Company competes. Additionally, due to material uncertainties, it
is not possible to predict the length of time the Company will operate under
chapter 11 protection, the outcome of the proceeding in general, whether the
Company will continue to operate under its current organizational structure, or
the effect of the proceeding on the Company's businesses and the interests of
various creditors and security holders.
Because the information herein is based solely on data currently
available, it is subject to change as a result of events or changes over which
the Company may have no control or influence, and should not be viewed as
providing any assurance regarding the Company's future performance. Actual
results and performance may differ from the Company's current projections,
estimates and expectations and the differences may be material, individually or
in the aggregate, to the Company's business, financial condition, results of
operations, liquidity or prospects. Additionally, the Company is not obligated
to make public indication of changes in its forward-looking statements unless
required under applicable disclosure rules and regulations.
Item 9.01. Financial Statements and Exhibits
(c) Exhibits.
10.1 First Amendment to Amended and Restated Debtor-in-Possession and Exit
Credit Agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 3, 2005
FOOTSTAR, INC.
By: /s/ Maureen Richards
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Maureen Richards
Senior Vice President, General Counsel
and Corporate Secretary
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EXHIBIT INDEX
Exhibit No. Description
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10.1 First Amendment to Amended and Restated Debtor-in-Possession
and Exit Credit Agreement.
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