The Wet Seal Inc., which filed a voluntary Chapter 11 petition for bankruptcy court protection late Thursday in Delaware, has secured $20 million in financing.
The debtor-in-possession financing facility is provided by B. Riley Financial Inc and Great American Group. The DIP is a $20 million term loan facility that will be used to fund the retailer’s operations during bankruptcy.
Wet Seal also filed a plan to reorganize and exit bankruptcy proceedings as an ongoing concern. This calls for B. Riley Financial to receive the majority of the stock of the reorganized company once it emerges from bankruptcy.
Both the DIP financing arrangement and the reorganization plan are subject to bankruptcy court approval. In addition, the reorganization plan contains certain conditions that must be met by the company.
Ed Thomas, chief executive officer of Wet Seal, said, “Overall, we continue to believe in The Wet Seal and remain committed to executing on the strategic steps that we already started.”
The bankruptcy filing wasn’t unexpected as in December Wet Seal raised the possibility in a regulatory filing that a Chapter 11 might be needed. The retailer earlier this month shuttered 338 doors. It currently plans to operate 173 stores, plus its Internet business.
Provided the Delaware bankruptcy court approves Wet Seal’s reorganization plan, the teen retailer has the chance to avoid the same fate as two other recent retail bankruptcy filings.
Deb Shops and Delia’s Inc., which filed last month, are in the process of liquidating.
The women’s retail sector has been particularly hard hit.
Body Central Corp., a women’s specialty chain, shuttered its doors Sunday night. About 265 stores were closed via a state process called ABC instead of a typical filing in bankruptcy court. The chain, based in Jacksonville, Fla., opted for the quicker process to shut down after Crystal Financial pulled its $17 million revolving credit line.
Cache inc., another women’s chain, is currently considering strategic options. Sources said the company is working on its financing options.