PacSun Opts to Cancel Bankruptcy Plans to Auction

by San Antonio Attorney

Pacific Sunwear, a surfwear brand, recently cancelled the official auction of the company’s assets after the acquisition by Golden Gate Capital, a private equity firm.

Golden Gate Capital, a company based in San Francisco, is set to acquire PacSun.  PacSun’s main headquarters is located in Anaheim, California.   Golden Gate aims to take over the company with a 100 percent ownership, according to the Orange County Register.

However, the approval from the bankruptcy court is still pending.

PacSun made the Chapter 11 filing last April, after a tremendous fourth-quarter loss of approximately $10 million.  The company has a total of 593 stores across the country, including 9 major branches located in the Orange County.

PacSun created a restructuring plan with Golden Gate Capital, under the premise that the lender agrees to convert more than 65 percent of the term loan debt of the reorganized company.  In return, they will give a minimum of $20 million worth of additional capital to the newly reorganized company after emerging from the Chapter 11 bankruptcy.

The only stalking horse bidder during the bankruptcy filing of PacSun was Golden Gate Capital.  The auction, scheduled on June 22 was immediately cancelled as Golden Gate officially takes over PacSun, as reported by the Orange County Business Journal.

Meanwhile, Wells Fargo Bank rendered a 5-year credit line worth $100 million to PacSun.  In addition to the previous credit line that costs $41 million.

According to court documents, Pacsun intends to minimize cost on store leases, since these currently amount up to $140 million annually.  PacSun sought out most of their landlords for rent relief as well.

PacSun joins the roster of Orange County retailers who have filed for bankruptcy, along with Wet Seal and Quiksilver.  These companies have filed for bankruptcy for the past two years and have transitioned to private status.

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