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Wet Seal: where we stand now?

By Angela Gonzalez-Rodriguez


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Wet Seal’s bankruptcy, as well as its plans to find some sort of viability, is being closely followed by many in the trade, who see the troubled retailer as that which belled the cat for other teen apparel retailers.

After filling for voluntary bankruptcy, Wet Seal plans to survive its Chapter 11 case and emerge as a smaller chain.

Thus, the US retailer is working towards securing court approval of a plan to exit bankruptcy by mid-May. For this plan to come through, the fashion chain needs to turn itself over to its lender and repay most other creditors in full.

Wet Seal’s plan to come back: the time line

Here is a time line for the retailer’s steps:

- January, 15: Wet Seal (Nasdaq: WTSL) filed for bankruptcy protection: “This was a very difficult decision to make, but after reviewing many other options since I returned to the Company in September, our financial condition leaves us no other alternative than to close these stores,” chief executive Ed Thomas said in a statement.

- January, 20: The bankruptcy court approved Wet Seal's request to continue to operate its business, including interim approval of the financing arranged by B. Riley Financial.

- January, 27: The Wet Seal, Inc.’s stock was suspended on January 27, 2015 and has not traded on NASDAQ since that time.

- February, 18: A Delaware bankruptcy judge gave the green light to bidding procedures for women's clothier The Wet Seal Inc. Besides, US Bankruptcy Judge Christopher S. Sontchi conceded potential suitors two weeks to top a proposed Chapter 11 restructuring plan sponsored by B. Riley Financial Inc. and setting up a potential auction.

- February, 25: NASDAQ announces that it will delist the common stock Class A of The Wet Seal, Inc.

- March, 5: time ends for those interested parties to bid on Wet Seal and submit competing offers to B. Riley's sponsorship agreement — which backs a plan that, as recalled by Bloomberg, would convert the sponsor's 25 million dollars debtor-in-possession loan into a majority equity stake in the reorganised company.

As ruled by the competent judge, investors can propose either an alternative sponsorship agreement or make an offer to purchase the company through a Section 363 sale. In both instances, bidders must furnish Wet Seal with a replacement DIP facility.

This means that interested parties must better the existing deal by 1.5 million dollars – including 500,000 dollars in additional value for creditors and 1 million dollars in bid protections for B. Riley - Suitors must also provide a 1.5 million dollars deposit, according to court documents.

Each round will require a minimum overbid of 250,000 dollars, and Wet Seal will select the winning bidder in consultation with the creditors committee.

- March, 10: An auction would be held if multiple bids are received at the offices of debtor's counsel Klee Tuchin Bogdanoff & Stern LLP in Los Angeles.

If no qualified offers are submitted, Wet Seal intends to proceed with confirmation of the Chapter 11 plan sponsored by B. Riley.

Wet Seal