International News - Chapter 11 looms closer for ailing Footstar

US footwear giant Footstar has warned it may be forced to seek Chapter 11 bankruptcy protection unless vital funding is secured.

The retailer, which claims to sell one in every seven pairs of shoes in the US, has been in increasing financial difficulties since saying in November 2002 that it would restate its accounts for the years 1997 to 2002.

The announcement in 2002 followed the discovery by management that the company had cumulatively understated payments to suppliers by US$35 million (£18.4 million). It has been under investigation by the US Securities and Exchange Commission ever since.

Footstar said in a statement: 'The company is in negotiations with its lending syndicate with respect to obtaining necessary liquidity. The company has also initiated discussions with additional financing sources. In addition, the company is exploring the possibility of a sale of certain assets to obtain liquidity.

'If none of these alternatives is successful in the near-term the company will be required to file under Chapter 11 of the US Bankruptcy Code.'

Footstar has repeatedly delayed filing financial statements since November 2002, and secured a waiver from a syndicate of lenders delaying the release of a finan-cial update until the end of this month.

The retailer has 433 Footaction stores, 89 Just For Feet shops and 2,503 concessions.