FRESNO, Calif.–Gottschalks has filed for Chapter 11 with the U.S. bankruptcy court.
The 58-unit department store chain also said it would explore a sale of the business or other transaction with a third-party investor through a process to be approved by the court.
To fund its continuing operations during the reorganization process, Gottschalks has negotiated a $125 million debtor-in-possession financing from a group of lenders led by GE Capital.
Gottschalks will use the DIP credit facility to fund its working capital requirements, including employee wages and benefits, vendor payments and other operating expenses during the reorganization process.
“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,” said Jim Famalette, chairman and chief executive officer of Gottschalks, in a statement.
“The DIP financing will provide us with the additional flexibility to operate on a normalized basis as we conduct the sale process,” Famalette said. “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.”