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Wet Seal gets $27 million default notice


Embattled teen retailer Wet Seal Inc. has defaulted on $27 million in senior convertible notes and related costs.

In a regulatory filing, Wet Seal said the total amount due is equal to $28.8 million, plus costs of collection, attorneys’ fees and disbursements.

On Dec. 29, the company and its creditor -- Hudson Bay Master Fund Ltd. -- entered a forbearance agreement that lasts until Jan. 12, according to the filing, giving the retailer a two-week reprieve.

Wet Seal, a Foothill Ranch, Calif.-based chain focused on young women, has lost more than $150 million over the past two years and is projected to lose an additional $88 million in the current fiscal year. Competition from e-commerce sites and fast-fashion retailers, as well as a broader slowdown in mall traffic, have sent its sales tumbling.

The company also said in the filing that it had increased the base salary of Chief Financial Officer Thomas Hillebrandt to $350,000 from $255,000.

The retailer recently posted a loss of $35.9 million in the quarter ended Nov.1, up from a loss of $12.5 million the previous fiscal year.

Wet Seal, which previously reported it has engaged outside advisors to seek strategic alternatives, indicated it may consider filing for bankruptcy to recapitalize or restructure its debt and obligations.

In addition, the company plans to close 60 stores in the fourth quarter of fiscal 2014 as the lease term expires.

Wet Seal has hired outside advisors, including Houlihan Lokey and FTI Consulting, to assist it in analyzing potential alternatives.

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