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Pacific Sunwear Gets Golden Gate Lifeline

Retailer secures a key $60 million five-year term loan from Golden Gate Capital, plans to cut 20 percent of store base.

The PacSun store

Struggling teen retailer Pacific Sunwear Inc. on Wednesday snagged a key $60 million five-year term loan from Golden Gate Capital and said it would use a portion of that money to help it close upward of 200 stores over the next 14 months.

PacSun, which more than doubled its third-quarter net loss, also gave Golden Gate two board seats and the right to buy 19.9 percent of its stock, or 16.7 percent on a fully diluted basis, at $1.75 a share.

Golden Gate, which has $12.5 billion in capital under management and has worked with Express, J. Jill, Eddie Bauer and Zale Corp., said it would appoint two members of its retail group, Joshua Olshansky and Neale Attenborough, to the retailer’s board.

PacSun also inked a five-year $100 million revolving credit facility with Wells Fargo.

“When Hillary Clinton said it takes a village, I’m not sure she realized it also applies to apparel retailing,” PacSun president and chief executive officer Gary Schoenfeld said on the earnings call.

The ceo said it had become “increasingly evident” that in order for the surf and skate clothing retailer to become profitable, it would have to downsize its fleet to between 550 and 600 stores from the current 819 — a reduction of about 20 percent. The firm has reached agreements with each of its top five landlords as well as a number of other landlords across the country.

The Anaheim, Calif.-based retailer is also working to localize its merchandise offering and improve its fashions.

For the third-quarter ended Oct 29, the retailer posted a net loss of $17.6 million, or 26 cents a share, from $7 million, or 11 cents a share, a year earlier. Adjusted losses of 10 cents a share were 4 cents better than analysts expected.

Sales for the quarter dipped 6.2 percent to $242 million from $257.9 million as same-store sales fell 3 percent.

Shares of PacSun gained 3.1 percent to $1.35 Wednesday, but rocketed more than 40 percent in after-market trading, even though the retailer predicted fourth-quarter losses of between 44 cents and 58 cents a share. Adjusted losses were projected at 18 cents to 27 cents a share — a range that covers the 26-cent loss analysts already expected.