PacSun Files for Bankruptcy, Plans to Remain Open
Neither employees nor customers will be impacted during the bankruptcy plan, the company says.
It's official: SoCal surfer favorite PacSun on Thursday announced that the company has voluntarily filed for Chapter 11 bankruptcy protection in the District of Delaware.
As part of its reorganization plan, which was unanimously approved by the company's board of directors, PacSun has entered into an agreement with Golden Gate Capital to become a privately-owned business. The private equity firm is providing a $60 million loan and helping convert 65 percent of the brand's debt in exchange for equity and investing an additional $20 million in capital.
According to court documents, the apparel company cited the "shift in consumer behavior from traditional mall shopping toward online-only stores and increased competition throughout the specialty retail fashion industry" as some of the reasons for its recent downfall, noting that its competitors such as American Apparel, Delia's and Quiksilver have also had to file for bankruptcy protection or liquidate.
The documents also stated that moving away from key brand partners and merchandise that previously helped PacSun's growth, expanding too rapidly and investing in unprofitable business venture extensions were among the other factors that led the company to file for bankruptcy.
Despite the filing, PacSun will continue to keep its operations running with the $100 million bankruptcy loan from Wells Fargo. Neither employees nor customers will be impacted during the bankruptcy plan. Said PacSun CEO and president Gary H. Schoenfeld: "Our customers will continue to receive the same excellent products and customer service to which you are accustomed."