Pacific Sunwear of California Inc. is restructuring.
High rental costs and a $90 million debt coming due this year has led the teen retailer to file for Chapter 11 protection in the U.S. Bankruptcy Court, the company said today.
The California-based mall staple, known for its surf-lifestyle offerings, has entered into an agreement with private equity firm Golden Gate Capital, which will convert 65 percent of PacSun’s term loan debt into equity and provide a minimum of $20 million in additional capital to help the company reorganize after the Chapter 11 process. PacSun, which has also secured $100 million in debtor-in-possession (DIP) financing from Wells Fargo, will exit bankruptcy as a private company, owned by Golden Gate.
The retailer also announced its fourth quarter earnings results in conjunction with the bankruptcy confirmation. The company’s net sales for the fourth quarter gained modestly to $232.9 million versus net sales of $231.6 million in the comparable period. Same-store sales were slightly positive at 0.2 percent, while net losses narrowed year-over-year to $10 million, or 14 cents per diluted share, from losses of $26 million, or 38 cents per diluted share in the prior year’s same period.
“We have been making significant strides over the past several years to improve performance,” PacSun president and CEO Gary Schoenfeld said in a statement. “Due to our team’s hard work and unique brand partnerships, PacSun is the only one of our direct retail competitors to achieve compounded positive same-store-sales over the past four years.”
During the Chapter 11 proceeding, the company said it expects to continue to operate all 600 of its stores without interruption to customers, vendors, partners and employees.
The firm’s shares have been under pressure since reports of an imminent bankruptcy filing surfaced earlier in the week.
At 11 a.m. EST, PacSun’s stock had slipped 38 percent to a 52-week low.