Gottschalks Inc. has put itself up for sale as it filed to reorganize in a Chapter 11 bankruptcy. The Western department store chain has assets of $288.4 million and debts of $197.1 million, according to its bankruptcy petition filed Wednesday in the United States Bankruptcy Court for the District of Delaware.
In a statement, Gottschalks, which operates 58 department stores and three specialty apparel stores in six western states, including California (38), Washington (7), Alaska (5), Oregon (5), Nevada (1) and Idaho (2) said it has negotiated a $125 million debtor-in-possession financing from a group of lenders led by GE Capital. The financing, if approved in bankruptcy court, will fund employees' wages and benefits, some vendor payments and other operating expenses while the company reorganizes.
The company said that in collaboration with its advisors, the company has determined to pursue one or more options to create value for stakeholders, including a sale of its business or other transaction with a third-party investor through a process to be approved by the Court in order to attain the highest and best offer from interested parties.
Jim Famalette, chairman and chief executive officer of Gottschalks, stated, “This was a very difficult, but necessary decision; however, we want to assure our employees and loyal customers that Gottschalks will be conducting business as usual. Gottschalks is very proud of its 104-year heritage and our culture as the 'hometown store' serving the communities where our stores operate. While we have aggressively pursued a number of important steps over the past year to improve our performance and reduce costs, the persistent challenges in the economy and recent unexpected reductions to our borrowing capacity as a result of tightening credit markets have left us with no other recourse than to pursue a sale of the Company under Court approval in a Chapter 11 proceeding. The DIP financing will provide us with the additional flexibility to operate on a normalized basis as we conduct the sale process. We expect to proceed quickly and hopefully partner with a new owner that will continue to offer branded high quality merchandise and the special service that we have always provided to our customers.”
