NEW YORK — Wet Seal’s financial advisers believe an influx of $27.2 million from the private placement of equity securities will hasten a turnaround for the trendy but troubled clothing company.
This story first appeared in the July 1, 2004 issue of WWD. Subscribe Today.
The Foothill Ranch, Calif.-based specialty retailer will use the $25.9 million in net proceeds for working capital and general corporate purposes.
Additionally, Wet Seal issued about 6 million shares of its Class A common stock at $4.51 per share and warrants to acquire 2.1 million shares of Class A common stock at an exercise price of $5.41 per share.
“Any of the concerns about liquidity certainly have disappeared. Wet Seal had a strong balance before, and it now has another $27.2 million in cash to fund its business,” said Gilbert Harrison, chairman of investment banking firm Financo Inc., which is Wet Seal’s financial adviser.
As reported, there have been concerns regarding Wet Seal’s turnaround efforts after seven consecutive quarters of declining same-store sales, with much of its future riding on its upcoming back-to-school and fall seasons, according to Wall Street analysts.
The company also recently entered a new $50 million financing facility to replace its existing agreement.
“This transaction gives them additional liquidity for the fall season,” said Mary Anne Domuracki, managing director of the special situations group at Financo.
Domuracki noted the transaction was done “in a very short period of time. It involved three large institutional investors and was oversubscribed, which implies that investors are looking to a successful completion of [the retailer’s] turnaround.”
— Vicki M. Young and Carrie Melago