The Wet Seal Inc.’s fate — whether with B. Riley or a different owner — probably will be determined by mid-March.
The Delaware bankruptcy court will likely hold an auction of the retail chain’s assets on or around March 10.
Wet Seal filed a voluntary petition for Chapter 11 bankruptcy court protection on Jan. 16. At the time, the teen chain said it planned to exit from bankruptcy as a reorganized chain of just 173 stores — the company closed 338 stores on Jan. 7 shortly before it filed its petition — and its Internet business. The chain inked a deal with B. Riley Financial Inc., the parent of asset disposition firm Great American Group, for a $20 million debtor-in-possession financing facility. In exchange, and as part of the reorganization, the $20 million would convert into newly issued common stock of the restructured company and B. Riley would hold an 80 percent stake in the reorganized firm. The balance of the equity would be owned by certain creditors holding generally allowed unsecured claims left unsatisfied in the bankruptcy.
Since the filing, the unsecured creditors committee in the case has negotiated a $5 million increase in the purchase price by B. Riley to $25 million. Further, the no-shop provision has been renegotiated and now there are “go-shop” provisions that allow for an auction of Wet Seal’s assets in hopes of a better offer.
Bid procedures are in place, awaiting bankruptcy court approval. Also renegotiated was the breakup fee, now down to $625,000 from $1 million, should B. Riley get outbid by a better offer. It is still guaranteed $375,000 from Wet Seal as the commitment fee for the DIP facility.
The modification to the increase in purchase price plus the change in the breakup fee were approved by a Delaware bankruptcy court judge on Friday.
Presuming court approval is received, competing bids are due March 5, with the actual auction to be held March 10.