U.S-based teen apparels retailer Pacific Sunwear filed for Chapter 11 bankruptcy protection on Thursday. The company will continue to operate its 600 stores during the restructuring process.
As part of the restructuring, private equity firm Golden Gate Capital will convert more than 65% of the firm’s debt into equity. Further, Golden Gate would also provide at least $20m in additional capital once the company emerges from bankruptcy.
The retailer has also secured a $100m debtor-in-possession financing facility from Wells Fargo, which it can draw from while it goes through bankruptcy. Upom emerging from bankruptcy, Wells Fargo would provide the company a five-year, $100m revolving line of credit facility.
Company CEO Gary Schoenfeld stated that Pacific Sunwear was seeking bankruptcy protection in order to get rid of two thirds of its debt and restore its balance sheet, reduce store costs either by negotiating with landlords or getting out of leases.
PacSun follows in the footsteps of other retailers who have sought Chapter 11 protection, including American Apparel, Wet Seal, Delia’s and Sports Authority.