Wet Seal Creditor Committee Wangles Changes in Purchase PriceBill Rochelle
The newly formed Wet Seal Inc. creditors’ committee negotiated an increase in the clothing chain’s sale price and changes in financing for the company’s bankruptcy reorganization.
Wet Seal, a mall-based retailer catering to women 13 to 24, worked out a deal before its Jan. 15 bankruptcy filing that gives lender B. Riley Financial Inc. 80 percent of the stock in exchange for a $20 million investment. The remaining 20 percent was earmarked for unsecured creditors.
The committee, formed Jan. 30, persuaded Riley, the parent of liquidator Great American Group LLC, to raise the purchase price to $25 million.
Riley is also providing $20 million in secured financing for the bankruptcy effort. The interest rate on the loan will be 8.25 percent.
At the committee’s behest, Riley dropped a “no-shop” provision, opening the way for Wet Seal and the creditors to solicit competing offers.
If a judge approves the schedule, competing purchase offers will be due March 5, with an auction on March 10. If Riley loses the auction, its breakup fee will be $625,000, down from $1 million, although it will get a $375,000 commitment fee for the loan.
The collateral for Riley’s loan won’t include some lawsuits. In addition, there will be limits on professional fees Riley can shift to Foothill Ranch, California-based Wet Seal.
A hearing to approve the loan and the so-called plan-support agreement is set for Thursday.
Members of the creditor committee include landlords Simon Property Group Inc. and General Growth Properties Inc.
Wet Seal closed 338 of its stores on Jan. 7, leaving 173 in 42 states. The remaining locations represent about half of the chain’s revenue.
The chain listed assets of $92.9 million and debt totaling $103.4 million. Liabilities include $28.9 million on convertible notes held by Hudson Bay Master Fund Ltd. and about $31.1 million in claims from trade suppliers. There’s no secured debt. Wet Seal said it has about $250 million in tax losses to preserve.
The case is In re Wet Seal Inc., 15-bk-10081, U.S. Bankruptcy Court, District of Delaware (Wilmington).