Fresno, Calif. Gottschalks announced on Wednesday that it has filed a voluntary petition for reorganization relief under Chapter 11 of the United States Bankruptcy Code.
In related news, Goody’s, which exited Chapter 11 in Oct. 2008, said it will liquidate all 282 stores.
Both retailers are the latest casualties of the economic downturn.
Gottschalks said it will file a variety of first-day motions with the court that, with court approval, will allow the company to continue to conduct business as usual without interruption. In collaboration with its advisors, Gottschalks is considering 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.
Gottschalks has received a $125 million debtor-in-possession financing package from a group of lenders led by GE Capital.
Jim Famalette, chairman and CEO of Gottschalks, said, “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.”
Meanwhile, for the Goody’s chain-wide liquidation, Gordon Brothers Retail Partners and Hilco Merchant Resources will conduct the going-out-of-business sales.