According to the U.S. Bankruptcy Court docket, Pacific Sunwear of California (aka PacSun) filed for Chapter 11 protection in Wilmington, DE.
Concurrent with its Chapter 11 filing, the Company announced its restructuring support agreement (RSA) with affiliates of Golden Gate Capital, the holder of its secured term loan provider under the Company’s financing facilities. In conjunction with the RSA, a Plan of Reorganization was approved by the Company’s Board of Directors, which provides a comprehensive roadmap for the Company to continue to execute its strategy and position the Company for long-term success as a privately owned entity by Golden Gate Capital. The Company filed its Joint Plan of Reorganization and related Disclosure Statement with the Court. Pursuant to the Plan, Golden Gate Capital will be converting more than 65% of its term loan debt into the equity of the reorganized company and providing a minimum of $20 million in additional capital to the reorganized Company upon its emergence from Chapter 11 to support its long-term growth objectives.
The Company, which sells a combination of branded and proprietary casual apparel, accessories and footwear designed to appeal to teens and young adults, is represented by Michael R. Nestor of Young Conaway Stargatt & Taylor. According to documents filed with the Court, “In addition to industry-wide weaknesses, the Company’s financial performance was further adversely impacted by several critical mistakes committed by prior management in their merchandising and operating strategies….These errors confused customers regarding the Company’s message and merchandise, damaged critical relationships with key brands, and created opportunities for the Company’s competitors to accelerate their growth at the Company’s expense.”
Pacific Sunwear of California also announced that it has received a commitment for a flexible draw$100 million in debtor-in-possession financing from Wells Fargo Bank, National Association, the Company’s revolver lender, which will allow Pacific Sunwear of California to draw capital as needed to manage seasonal swings in cash flow. Wells Fargo Bank has also committed to provide a five-year $100 million revolving line of credit effective upon the Company’s emergence from Chapter 11 and subject to certain conditions.
Pacific Sunwear of California’s president and C.E.O., Gary H. Schoenfeld, states, “Through this restructuring, however, we plan to solve the two structural issues that operationally we could not fix on our own. First is a very high occupancy cost of approximately $140 million per year, and second is nearly $90 million of long-term debt coming due later this year. The bankruptcy process gives us the ability both to fix our balance sheet by reducing our long-term debt by more than 65%, and reduce our annual occupancy costs, either through landlord negotiations or lease rejections, appropriately adjusting the fixed costs of operating our stores to better match the shifting retail landscape.”
Read more PacSun bankruptcy news.
The post Pacific Sunwear of California Chapter 11 Petition Filed appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.