Versa Capital Management has won a bidding war for the remaining assets of apparel retailer Wet Seal, according to a statement from the private equity firm. Wet Seal filed for Chapter 11 bankruptcy in January 2015 and has closed 338 stores and laid off more than 3,700 employees.
The winning bid will be presented to the U.S. Bankruptcy Court for the District of Delaware on March 18, 2015, for final approval.
“We believe our agreement with Versa provides the best possible outcome for our creditors, employees, customers and other constituents,” said Ed Thomas, CEO of Wet Seal. “We are focused on executing an orderly emergence from bankruptcy court supervision and collaborating with Versa to improve the operational and financial performance of the business.”
The Versa deal includes: $7.5 million in cash that will be shared among unsecured creditors; an agreement to pay cure costs as well as administrative and priority claims; and $10 million in exit financing. Versa also agreed to take over a $20 million bankruptcy financing commitment from competing bidder B. Riley Financial, and paid them a $625,000 breakup fee.
B. Riley initially agreed to take 80% of the equity in Wet Seal in exchange for $25 million before Versa exceeded its offer.
Wet Seal estimated that its assets were worth between $10 million and $50 million, according to its bankruptcy filing, with liabilities between $100 million and $500 million. During the bankruptcy, the retailer continued to keep its remaining 173 stores open.