A U.S. Trustee associated with bankrupt retailer Pacific Sunwear stated that an executive bonus plan proposed by the company must be rejected as its terms virtually guarantee payments.
However, Pacific Sunwear’s unsecured creditors support the payout plan, believing it will help the company emerge from bankruptcy.
The retailer had filed for Ch-11 bankruptcy in April 2016 and is engaged with creditors to emerge as a viable company post restructuring.
Teen retailer Aeropostale Inc. is preparing to file for bankruptcy this week and close more than 100 stores on falling sales and increasing losses. The company has been unable to return to growth in the last few years, unlike its peers American Eagle Outfitters and Abercrombie & Fitch, as young customers have turned away from branded clothing.
Aeropostale would become the latest retailer to file for Ch-11 bankruptcy. Previously, the Wet Seal, Quicksilver, Pacific Sunwear, Sports Authority, and Vestis Retail (parent of Eastern Mountain Sports) are among the chains to seek bankruptcy protection from the courts in the last 16 months.
The company’s shares were delisted by the NYSE in April 2016 for trading below $1 a share for an extended period.
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.