Wet Seals May File for Bankruptcy Again

by San Antonio Attorney

Within a year after Wet Seal filed for Chapter 11 bankruptcy, the teen clothing retailer is possibly returning to the bankruptcy court, according to reports.

Versa Capital Management, the private equity firm which acquired Wet Seal for $7.5 million in 2015, is looking at options for the struggling clothing company. Those choices include selling its stores and concentrating on e-commerce or finding buyers for its assets, according reports.

In a released statement, Wet Seal said it is still weighing its options.

The California-based retailer received court confirmation in November 2015 on its plan to liquidate. It allowed the retailer to leave bankruptcy funded by the equity firm with 173 stores.

At present, there are 171 Wet Seal stores in 42 states.

In the event Wet Seal files for bankruptcy again, it will probably reflect that of American Apparel’s and Jasmin Yang, according to a bankruptcy lawyer.

Gildan Activewear paid $88 million for American Apparel’s intellectual property on Jan. 12.

The lawyer said a Chapter 22, which is an informal term for a second filing of Chapter 11, is likely to happen if no fundamental changes happen.

When a bankruptcy plan is confirmed by a judge, it is assumed that the debtor will not be insolvent again. Hence, if Wet Seals files for Chapter 11 again, it is improbable that it will be capable of emerging as a reorganized company.

As the owner, Versa is likely to protect its investments by closing down underperforming stores, which are mostly located in shopping falls.

Retailers that are based in malls are having a hard time to increase traffic at their stores. According to reports, Macy’s and Sears have experienced a decline in store sales in November and December 2016.

Wet Seals filed for Chapter 11 bankruptcy in January 2015 with $103.42 million in debts.

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