Succumbing to mounting losses and intense competition from fast-fashion retailers and online rivals, teen apparel retailer Pacific Sunwear of California Inc filed for Chapter 11 bankruptcy protection on Thursday.
The company said in a statement that it plans to be taken private by investment firm Golden Gate once it emerges from bankruptcy. The company joins recent U.S. Chapter 11 filings by surfwear brand Quicksilver and teen retailer American Apparel.
The announcement saw the shares of the company fall to a record low of 5 cents on Thursday.
Due to concerns that a significant change in ownership could impair its ability to use tax benefits on operating losses down the road, lawyers for the retailer asked a judge to restrict trading on Thursday citing "significant and unusual trading".
PacSun, Founded in 1982 as a surf shop, has posted an annual net loss since the financial crisis hit in 2008.
The net operating losses of about $342.7 million as of Jan. 31 can be used to reduce tax liabilities if it becomes profitable again.
"The company believes that this is an extremely valuable asset of the bankruptcy estate," Joseph Barry of Young Conaway Stargatt & Taylor said at an emergency hearing in Delaware on Thursday.
The holders of PacSun stock will be notified as the interim motion was approved by U.S. Bankruptcy Judge Laurie Silverstein.
Pacific Sunwear said Golden Gate plans to provide a minimum of $20 million in additional capital and convert more than 65 percent of its debt into equity. Golden Gate had lent PacSun about $60 million in 2011.
A debtor-in-possession credit agreement of $100 million with Wells Fargo Bank, the company also said.
According to its court filing, The Anaheim, California-based retailer listed liabilities of between $100 million and $500 million and assets in the range of $50 million to $100 million.
While top investors include investment firm GI2 Ltd with a 28.6 percent stake and Adage Capital Management LP with a 14.1 percent stake, the court filing named Nike Inc and mall operator Simon Property Group Inc among its creditors.
PacSun said it does not expect the bankruptcy filing to have an immediate impact on employees and it would continue to operate all of its 600 stores.
In March rival Aeropostale Inc had said that other strategic alternative including a sale were being explored and analysts say that this is an option that PacSun may also need to contemplate.
(Source:www.reuters.com)
The company said in a statement that it plans to be taken private by investment firm Golden Gate once it emerges from bankruptcy. The company joins recent U.S. Chapter 11 filings by surfwear brand Quicksilver and teen retailer American Apparel.
The announcement saw the shares of the company fall to a record low of 5 cents on Thursday.
Due to concerns that a significant change in ownership could impair its ability to use tax benefits on operating losses down the road, lawyers for the retailer asked a judge to restrict trading on Thursday citing "significant and unusual trading".
PacSun, Founded in 1982 as a surf shop, has posted an annual net loss since the financial crisis hit in 2008.
The net operating losses of about $342.7 million as of Jan. 31 can be used to reduce tax liabilities if it becomes profitable again.
"The company believes that this is an extremely valuable asset of the bankruptcy estate," Joseph Barry of Young Conaway Stargatt & Taylor said at an emergency hearing in Delaware on Thursday.
The holders of PacSun stock will be notified as the interim motion was approved by U.S. Bankruptcy Judge Laurie Silverstein.
Pacific Sunwear said Golden Gate plans to provide a minimum of $20 million in additional capital and convert more than 65 percent of its debt into equity. Golden Gate had lent PacSun about $60 million in 2011.
A debtor-in-possession credit agreement of $100 million with Wells Fargo Bank, the company also said.
According to its court filing, The Anaheim, California-based retailer listed liabilities of between $100 million and $500 million and assets in the range of $50 million to $100 million.
While top investors include investment firm GI2 Ltd with a 28.6 percent stake and Adage Capital Management LP with a 14.1 percent stake, the court filing named Nike Inc and mall operator Simon Property Group Inc among its creditors.
PacSun said it does not expect the bankruptcy filing to have an immediate impact on employees and it would continue to operate all of its 600 stores.
In March rival Aeropostale Inc had said that other strategic alternative including a sale were being explored and analysts say that this is an option that PacSun may also need to contemplate.
(Source:www.reuters.com)
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