NEW YORK — Specialty retailer The Wet Seal Inc. entered into an agreement to buy G&G Retail Inc. for $15.2 million.
Last week, G&G Retail, which is under supervision of a Manhattan bankruptcy court, was finalizing a Chapter 11 bankruptcy court protection filing. According to an e-mail received by WWD from a former G&G staffer at corporate headquarters, the retailer’s board last Friday evening decided against restructuring strategies. WWD reported earlier this month that the company had stopped paying its bills last month, and that several suppliers stopped shipping goods to the stores. The company filed for Chapter 11 late Thursday night.
Court documents filed in the bankruptcy petition said G&G’s board initially decided to enter into a debtor-in-possession financing facility with its largest lender, The CIT Group/Business Credit Inc. It was also to be acquired by a joint venture between Gordon Brothers Retail Partners, DJM Asset Management and Hilco Merchant Resources. But G&G subsequently received the offer from Wet Seal and deemed it a better deal.
A source close to the negotiations said while the Gordon Brothers-led group was looking to liquidate G&G, Wet Seal was keen on keeping the business as an ongoing concern, which also meant a higher likelihood of store associates keeping their jobs.
Wet Seal will provide $10 million in DIP financing to G&G through an affiliate of Prentice Capital Management, an investor in the Foothill Ranch, Calif.-based juniors chain. Prentice Capital, a money management firm, has been active lately. An affiliate of Prentice on Dec. 27 concluded its deal to buy Goody’s Family Clothing and take the company private. It also acquired bankrupt Levitz Home Furnishings last month for $70 million. The company also provided financing to distressed Whitehall Jewellers.
Wet Seal said it will initially operate 450 stores under the Rave, Rave Girl and G&G nameplates. G&G operated 566 stores in the U.S. and in Puerto Rico at the time of its filing. Executives at Wet Seal could not be reached for comment.
G&G is seeking court approval to hire Corporate Revitalization Partners as its crisis manager, with Charles F. Kuoni 3rd as chief restructuring officer. The bankrupt retailer is also seeking court approval to hire Financo Inc. as its investment banker. Both approvals from the court were expected on Thursday.
“Financo believes we can add value by helping to stimulate interest as appropriate,” said William Susman, president and chief operating officer.
The purchase isn’t a done deal. Because the acquisition requires bankruptcy court approval and is subject to better offers, there’s still a possibility that others could come in and best Wet Seal’s $15.2 million bid. An industry source close to G&G said that strategic and financial players are also now eyeing G&G, such as Max Azria/BCBG, Rainbow Shops and Hot Topic, as well as Gordon Brothers.