Gadzooks seeks court approval for $5 million short-term loan

By Jeff Pines

Washington, Oct. 26 - Gadzooks Inc., a Dallas area-retailer, said it needs the U.S. Bankruptcy Court for the Northern District of Texas to let it borrow $5 million from Gryphon Master Fund LP at 17% interest, or the "maximum nonusurious rate of interest permitted."

Gadzooks said it needs the extra cash so it can buy merchandise for the upcoming holiday season.

The company's debtor-in-possession lender, Wells Fargo Retail Finance LLC, told the Gadzooks it will not grant a "seasonal over-advance," so Gadzooks turned to Gryphon, a member of the equity holders' committee and one of the investors that agreed to participate in and guarantee the company's proposed rights offering.

Without the extra cash, Gadzooks management said the viability of its business "is in serious doubt" and called the effect of not having the money "catastrophic."

If approved, Gadzooks must pay a 300 basis point fee before receiving the funding. Another condition of the loan requires that the company's exclusive right to file a reorganization plan be extended to May 30, 2005.

In addition, the company wants the court to approve an amendment to Gadzooks' $30 million DIP that includes Gadzooks paying a $150,000 waiver fee to Wells Fargo.

Gadzooks filed for bankruptcy on Feb. 3, 2004. Its Chapter 11 case number is 04-31486.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.