Pacific Sunwear of California Inc. has hired Washington, D.C.-based restructuring firm FTI Consulting Inc. and investment bank Guggenheim Securities in New York to deal with $160 million in debt payable at the end of this year.
The Anaheim-based teen apparel and accessories retailer took out a $100 million credit line in 2011 from Wells Fargo Bank, N.A. The credit line is scheduled to mature in December. It had used all but $22 million of it as of October.
A $60 million term loan funded by an affiliate of Golden Gate Capital will be due this December as well.
The 611-store chain has posted an operating loss of about $12.5 million on $568 million in sales over the first nine months of its fiscal year, and its stock price—currently trading at 22 cents—has fallen about 90% over the past 12 months. The company’s market value is about $15.4 million.
The retailer implemented an annual cost reduction program in the third quarter of fiscal 2015, designed to save about $15 million during fiscal 2016. The program includes “more streamlined in-store execution, reductions in selling, general and administrative expenses and capital expenditures, and … restructuring of certain positions and departments at the corporate headquarters.”
It also is considering sale and leasebacks of its headquarters in Anaheim and its distribution center in Olathe, Kan.
“If our comparable store net sales and gross margins continue to decline, and if we continue to experience negative operating results, we may deplete all of our cash reserves and be required to access most, if not all, of the Wells Credit Facility,” the company said in the regulatory filing. “We also could potentially require other sources of financing to fund our operations and to refinance the Term Loan, which sources might not be available on a timely basis, or at all. Should we be unable to execute our plans, remain in compliance with the Term Loan or the Wells Credit Facility or obtain additional or alternative financing, we may be unable to repay the Term Loan and continue as a going concern for a reasonable period of time.”
