Gottschalks files for bankruptcy

FRESNO, Calif. Gottschalks announced that it has filed a voluntary petition for reorganization relief under Chapter 11 of the United States Bankruptcy Code. The company intends to file a variety of first day motions with the court that, with court approval, will allow it to continue to conduct business as usual without interruption. 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.

Gottschalks said that in order to fund its continuing operations during the reorganization process, it has negotiated a $125 million debtor-in-possession (DIP) financing from a group of lenders led by GE Capital.

Jim Famalette, chairman and CEO of Gottschalks, stated, "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."