PacSun announced that it and all of its subsidiaries have entered into a restructuring support agreement (the "RSA") with affiliates of Golden Gate Capital, the holder of its secured term loan provider under the Company's financing facilities. In conjunction with the RSA, a Plan of Reorganization (the "Plan") was approved by the Company's Board of Directors, which provides a comprehensive roadmap for the Company to continue to execute its strategy and position the Company for long-term success as a privately owned entity by Golden Gate Capital.
The parties intend to implement the Plan through a Chapter 11 process. To that end, PacSun filed voluntary petitions to restructure under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). Under the Plan, PacSun will continue to operate its business without interruption to customers, vendors, partners and employees.
Pursuant to the Plan, Golden Gate Capital will be converting more than 65% of its term loan debt into the equity of the reorganized company and providing a minimum of $20 million in additional capital to the reorganized Company upon its emergence from Chapter 11 to support its long-term growth objectives. The Company also announced that it has received a commitment for a flexible draw $100 million in debtor-in-possession ("DIP") financing from Wells Fargo Bank, National Association ("Wells Fargo"), the Company's revolver lender, which will allow the Company to draw capital as needed to manage seasonal swings in cash flow. Wells Fargo has also committed to provide a five-year $100 million revolving line of credit effective upon the Company's emergence from Chapter 11 and subject to certain conditions.
Josh Olshansky, Managing Director at Golden Gate Capital, said: “PacSun has successfully transitioned beyond its historical base of action sports brands to what we believe is the most relevant and coveted mix of brands celebrating the California lifestyle. We believe in the future of the Company, as reflected by our significant injection of new capital into the business. While there is still work to be done, we are supportive of the steps the Company and its management team have taken to position PacSun for success and growth long after emergence. Notably, the Company has delivered positive comparable store sales in 13 of the past 16 quarters. We look forward to working closely with Gary and the PacSun team to build a stronger future while continuing to deliver the compelling product assortment and great shopping experience that has long defined PacSun to customers.”
The DIP from Wells Fargo provides for a $100 million revolving credit facility that will allow the Company to draw capital as needed to manage seasonal swings in cash flow, subject to certain limitations and conditions. This DIP financing, in conjunction with the Company’s cash on hand, is expected to fund the Company's operations during the Chapter 11 process, including its obligations to vendors, employees, and other purveyors of goods and services. The DIP is subject to Bankruptcy Court approval and the satisfaction of specified closing conditions.
PacSun intends to operate its business as usual throughout the Chapter 11 restructuring process. All PacSun stores nationwide will remain open on normal schedules and are continuing to operate in the ordinary course. The Chapter 11 filing should have no immediate impact on PacSun’s employees and customers.
Guggenheim Securities is acting as investment banker for the Company, Klee, Tuchin, Bogdanoff & Stern LLP is the Company’s legal counsel in connection with the debt restructuring, and RCS Real Estate Advisors is the Company's real estate advisor. FTI Consulting serves as its restructuring advisor. Perella Weinberg Partners is acting as financial advisor for Golden Gate Capital, and Kirkland & Ellis is Golden Gate Capital’s legal counsel. Choate Hall & Stewart LLP is Wells Fargo's legal counsel.
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