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News > Companies
Converse files bankrutpcy
January 22, 2001: 12:32 p.m. ET

Sneaker maker to end North American production, shift to licensee business
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NEW YORK (CNNfn) - Converse Inc., the athletic shoe maker whose most popular sneaker was a canvas model named for a little known player born a century ago rather than a high-price, high-tech model named after today's stars, filed for bankruptcy protection Monday.

The company said it plans a restructuring that would include closing North American plants, becoming an exclusive licensee for Converse products made overseas.

graphicThe North Reading, Mass.-based company lost $5.4 million, or 31 cents a share, in the third quarter ending Oct. 2, the most recent period for which it has released results, as sales fell 22 percent from the year earlier period.

Converse said it has enough financing to continue operations during the restructuring. Converse also said it had agreed to sell its North Reading headquarters building for $15.1 million to reduce debt.

Converse signed a deal with Global Brand Marketing Inc. under which it will become licensee of Converse-brand footwear in the United States, subject to court approval, which is similar to Converse's licensing model in overseas markets.

"When royalty income from GBMI is added to that of our existing licensing agreement, Converse will be generating a substantial stream of royalty income," said a statement from Glenn Rupp, its CEO.

The closing of three plants in North America will cost about 1,000 jobs.

While competitors such as Nike and Reebok built their brands around today's top athletes, Converse' signature sneaker is the Chuck Taylor All-Star, named for basketball pioneer born in 1901 who played before there were established leagues. It did have some modern players endorsing its products, including Karl Malone of the Utah Jazz and some high-profile "legends" endorsers such as Larry Bird and Julius Erving.

Leon Black's Apollo Investment Fund owns about 64 percent of Converse stock. The private investment fund specializes in distressed companies.

As recently as October, PC makers slide Rupp was denying that Converse's future was shaky.

"We are experiencing strong demand for Converse products in key U.S. and European markets and in Japan, where the Chuck Taylor All Star continues to be the number-one-selling athletic shoe," he said at that time. "Our business continues absolutely uninterrupted, with our factories on schedule for delivery of the spring product line. To be sure, the company faces significant challenges with respect to its indebtedness and continues to talk to its financing sources concerning the restructuring of its obligations."

Shares of Converse became a "bulletin board" stock trading off the main Nasdaq exchange last summer due to low share price. Shares were trading unchanged at 17 cents Monday morning.

-- from staff and wire reports graphic





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