PACSUN FILES CHAPTER 11 AND PLANS TO TAKE COMPANY PRIVATE
Pacific Sunwear of California, Inc. and all of its subsidiaries have filed voluntary petitions to restructure under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Under the plan, PacSun will continue to operate its business without interruption to customers, vendors, partners and employees.
The company has also entered into a restructuring support agreement (RSA) with affiliates of Golden Gate Capital. In conjunction with the RSA, a plan of reorganization was approved by the company’s Board of Directors, which provides a comprehensive roadmap to position the company as a privately owned entity by Golden Gate Capital.
Pursuant to the plan, Golden Gate Capital will be converting more than 65 percent 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 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, which will allow the company to draw capital as needed to manage seasonal swings in cash flow. Wells Fargo 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.
“The plan negotiated with Golden Gate Capital and approved by our Board of Directors places PacSun in a very promising position as we continue the brand and merchandising transformation that our team has worked relentlessly to achieve,” said Gary H. Schoenfeld, president and CEO of PacSun. “Golden Gate Capital is a private equity investment firm with over $15 billion of capital under management and a tremendous track record of success. Their deep familiarity with our business, retail expertise, financial strength and industry experience make them an exceptional equity partner for us going forward. Importantly, great brand partnerships will remain paramount to PacSun’s success and the plan provides for all key suppliers to be paid in full following the effective date of the plan.”
Josh Olshansky, managing director at Golden Gate Capital, added: “PacSun has successfully transitioned beyond its historical base of action sports brands to what we believe is the most relevant and coveted mix of brands celebrating the California lifestyle. We believe in the future of the company, as reflected by our significant injection of new capital into the business. While there is still work to be done, we are supportive of the steps the company and its management team have taken to position PacSun for success and growth long after emergence. Notably, the company has delivered positive comparable store sales in 13 of the past 16 quarters. We look forward to working closely with Gary and the PacSun team to build a stronger future while continuing to deliver the compelling product assortment and great shopping experience that has long defined PacSun to customers.”
