Gadzooks get court approval for $30 million debtor-in-possession financing

By Jeff Pines

Washington, Feb. 26 - Gadzooks, Inc. said it received final court approval for a $30 million debtor-in-possession financing from Wells Fargo Retail Finance LLC.

It had previously been approved on an interim basis.

The borrowing base is based upon an agreed formula, with an interest rate of prime plus 100 basis points. The unused fee is 37.5 basis points. In addition, there is a $300,000 early termination fee, and the closing fee is 40 basis points of the DIP.

Reserves that had been in place under the interim agreement were released and advance rates were raised, resulting in $3 million of increased borrowing availability. In addition, Gadzooks negotiated a future commitment to provide incremental borrowing capacity upon the filing of the company's fiscal 2003 federal income tax return, which is expected to result in a tax refund. This commitment should provide $3.5 million of extra borrowing power.

The approval came over the objection of the committee of unsecured creditors, which argued the company did not really need the financing and was trying to roll pre-petition debt into the debtor-in-possession financing, thus giving certain creditors preference over others.

Gadzooks, based in Dallas, is a specialty retailer focusing young ladies aged 16-22. Its Chapter 11 case number is 04-31486.

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