NEW LIFE FOR GADZOOKS: Teen retailer Gadzooks Inc. said on Monday it reached an agreement with six investment funds to backstop a $25 million rights offering which will fund the retailer’s Chapter 11 plan of reorganization and exit from bankruptcy. Some of the funds are also stockholders of the retailer. Under the agreement, existing stockholders of Gadzooks will be offered the opportunity to purchase newly issued shares of common stock of the reorganized firm, with the investment funds each purchasing shares that are not picked up for purchase by the existing stockholders. In exchange for the backstop, the funds will receive warrants for shares of reorganized Gadzooks representing 25 percent of the number of shares offered. Proceeds from the backstopped rights offering will be used for working capital and will fund a distribution to Gadzook’s creditors. Gadzooks expects to file its plan of reorganization and disclosure statement later this month in a Texas bankruptcy court.

This story first appeared in the October 19, 2004 issue of WWD. Subscribe Today.