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Wet Seal Files for Bankruptcy

The Wet Seal, young women’s clothing retailer, announced Friday that it has filed for Chapter 11 bankruptcy protection. The company will continue to operate its business as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court.

Ed Thomas, Wet Seal CEO, said, “After careful consideration, the Board of Directors unanimously concluded that filing for Chapter 11 was the appropriate course of action for the Company. Overall, we continue to believe in The Wet Seal and remain committed to executing on the strategic steps that we already started. We are thrilled to be working with B. Riley and other constituencies toward the successful and prompt emergence of the Company from Chapter 11.”

The brand has also negotiated a debtor in possession financing arrangement (DIP) and plan sponsorship agreement (PSA) with B. Riley Financial Inc. The DIP provides a $20 million term loan, while the PSA supplies a comprehensive blueprint for the company’s emergence from Chapter 11.

In conjunction with the bankruptcy filing, the Wet Seal is seeking customary authority from the Bankruptcy Court that will allow it to continue its operations and serve its customers. The requested approvals include requests for the company to make wage and salary payments, continue assorted benefits for employees and honor specific customer programs, like gift cards and returns on merchandise purchased before the filing.

As of Jan. 12, 2015 the company had about $31 million of cash on the balance sheet and almost $11 million of cash used to collateralize letters of credit.

The Wet Seal first announced that it was considering filing for bankruptcy last month, if it was not able to immediately address liquidity concerns.

The brand recently decided to close 388 stores, leaving 3,695 full and part-time employees jobless.