Pacific Sunwear of California Inc. continues to wind its way through Chapter 11 proceedings, winning the approval of a bankruptcy judge to begin soliciting bids for the company.
The approval could open the Anaheim, Calif.-based retailer up for auction if it receives at least one qualified bid in addition to the stalking horse offer.
Pacific Sunwear filed for Chapter 11 in April in a move expected to help the retailer exit leases and shrink its real estate footprint, while also removing it from the weight of crushing debt levels, including a $90 million long-term debt obligation that would have come due this year.
The company ballooned to nearly 1,000 stores in 2006 but in more recent years shuttered doors and its D.e.m.o. chain as part of a strategy to improve the business that also included various tactics to improve the product mix at PacSun stores. This ranged from playing up action-sports heritage brands to later shifting away from that to more fashion-forward styles, particularly on the women’s side.
The pre-packaged bankruptcy filing included $100 million in debtor-in-possession financing from Wells Fargo and a five-year, $100 million revolving credit line once the retailer emerges from bankruptcy.
If multiple bidders do not come forward, the company would ultimately be taken private under its secured term loan holder Golden Gate Capital, which will provide some $20 million upon the company’s emergence from bankruptcy.
Bidders have until June 15 to send in their submissions. An auction date has been set for June 22.