Footstar declares special cash distribution, moves toward liquidation

By Lisa Kerner

Charlotte, N.C., May 9 - Footstar, Inc.'s board of directors declared a special cash distribution to shareholders of $1.00 per common share as the company continues to wind down its business through 2009.

The special distribution will be paid on June 3 to shareholders of record at the close of business on May 28, according to a Footstar news release.

In April, Footstar sold its brands to Kmart for $13 million. The company said the sale provided extra cash for the special distribution while allowing it to maintain appropriate liquidity.

The board said it adopted a plan of liquidation in connection with the dissolution of Footstar following the expiration of its agreement at year-end 2008 with Kmart. Operation of Kmart's in-store footwear departments will be transitioned from Footstar to Kmart.

Under the plan, the company will make a series of cash distributions to its stockholders from cash on hand and generated through asset sales.

Footstar shareholders can expect to see a plan of dissolution from the company in 2009, the release said.

It was also announced that Footstar entered into an amended credit agreement with Bank of America to extend the term of its existing credit agreement to the earlier of Dec. 31, 2008 or the termination of the Kmart agreement. The amended agreement lowers the maximum borrowing amount to $50 million from $100 million, according to the release.

Footstar is discount footwear company based in Mahwah, N.J.

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