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Pacific Sunwear demonstrates debt relief excellence

When seeking bankruptcy protection, most businesses desire to find a way to restructure and cut debt that will allow them to emerge financially solvent. While this is certainly possible, the process often requires making drastic changes such as closing stores and seeking significant corporate reorganization. Companies in Kentucky considering seeking debt relief may take heart in the story of Pacific Sunwear of California, Inc. (PacSun), which recently emerged from bankruptcy.

Before PacSun filed for Chapter 11 in April, it attempted to reverse a failed expansion plan and closed hundreds of stores throughout the country. When those methods failed, the company sought bankruptcy protection. At the time the company filed for Chapter 11, it had 593 stores. Currently, it operates 583 stores.

The company recently won court approval to leave bankruptcy, after it demonstrated that it continued to close additional stores, cut its debt and put pressure on mall space landlords to reduce its rent. The reorganization plan that was approved by a U.S. Bankruptcy Judge specified that PacSun would give all of its stock to the affiliates of its senior lender, the private equity firm Golden Gate Capital. For this, Golden Gate agreed to reduce the total amount that PacSun owed from $88 million to $30 million.

This success story may demonstrate to distressed Kentucky companies that there is hope in seeking debt relief in times of financial stress. Experienced bankruptcy attorneys can evaluate clients' unique financial positions and discuss the various forms of bankruptcy or other debt relief available. They will also be able to advise clients about the most promising paths to financial solvency.

Source: ocregister.com, "Pacific Sunwear has 'retailer's dream' as bankruptcy wraps up", Sept. 7, 2016

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