Kaplan said Pacific Sunwear considered a sale in 2011, but decided instead to obtain financing from Golden Gate Capital rather than selling the company for what it believed was less than fair value. He made his comments at the 15th Annual ICR Xchange Conference held in Miami on Jan. 16.
Anaheim, Calif.-based Pacific Sunwear also has a $100 million revolving credit facility from Wells Fargo Capital Finance Inc. it has yet to draw on, which will provide capital as the company continues the turnaround effort.
Golden Gate, a San Francisco private equity firm, invested a $60 million senior secured term loan in exchange for convertible preferred stock, giving it the right to buy up to 19.9% of common stock, or 16.7% on a fully diluted basis, at a strike price of $1.75 per share, according to a Dec. 7, 2011, announcement.
In discussing Pacific Sunwear's restructuring, Kaplan said the first stage of the turnaround was to sort out the company's real estate assets. During his presentation, Kaplan said Pacific Sunwear has closed more than 200 stores since 2010, adding that about 10% of the company's stores were cash flow negative in 2012, compared to about 30% in 2010. Pacific Sunwear has aggressively worked to improve its real estate margins over the past 15 months through a combination of lease expirations, lease buyouts, rent reductions and landlord renegotiations.
By the end of this year, Pacific Sunwear will have 644 stores, chief executive Gary Schoenfeld said during the presentation. That's down from 819 stores as of Dec. 7, 2011.
Kaplan later added that the retail chain expects to close another 20 to 30 stores this year that are mostly cash flow negative through lease expirations, noting that they are not concentrated in any one region.
..... Continue reading .... ( Source Richard Collings www.thedeal.com )
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