The Wet Seal Inc. filed for Chapter 11 bankruptcy protection but will continue business operations under the jurisdiction of the U.S. Bankruptcy Court, the Orange County-based teen clothing chain announced Friday.
Last week, Wet Seal announced plans to close 338 stores and lay off about 3,700 full- and part-time workers, leaving the company with about 170 retail and online outlets.
The specialty retailer said it worked out a “debtor in possession” financing arrangement with B. Riley Financial Inc. that “provides for a $20 million term loan facility, subject to certain limitations and conditions, including a $5 million availability block at closing, from B. Riley to be funded on an interim and final basis.”
“This loan facility will provide availability to fund the company’s operations during the Chapter 11 cases, including to the company’s vendors and other purveyors of goods and services,” a Wet Seal statement says.
The company said it “also expects to continue to fund operations from cash on hand and cash generated during the cases.”
The debtor-in-possession agreement is subject to bankruptcy court approval and meeting closing conditions.
“After careful consideration, the board of directors unanimously concluded that filing for Chapter 11 was the appropriate course of action for the company,” said Wet Seal CEO Ed Thomas.
Once popular in malls, Wet Seal has fallen on hard times, with its stock losing 98 percent of its value over the past year. With debt around $28.8 million, executives have come under fire for failing to pay employees, according to published reports.
— City News Service