Former Wet Seal, committee file joint liquidation plan following sale

By Caroline Salls

Pittsburgh, Aug. 11 – Seal123, Inc., formerly Wet Seal, Inc., and its official committee of unsecured creditors filed a joint plan of liquidation and related disclosure statement Monday with the U.S. Bankruptcy Court for the District of Delaware.

Seal123 said its assets are largely limited to cash and causes of action, as well as other assets excluded in the sale of the company’s assets to Versa Capital Management, LLC affiliate Mador Lending, LLC.

Under the proposed plan and a global plan settlement, for purposes of voting and distribution, the Seal123 debtors will be substantively consolidated.

The company said the plan calls for the creation of a liquidation trust that will administer and liquidate all remaining property, including sale proceeds.

Treatment of creditors will include the following:

• Letter-of-credit facility claims, administrative claims, priority tax claims, pre-bankruptcy credit agreement claims, secured claims, priority claims and general unsecured claims will be paid or otherwise satisfied in full;

• Holders of multi-debtor consolidated general unsecured claims will hold a single claim in an allowed amount that is 150% of the face amount of the claim against a single debtor;

• Holders of allowed general unsecured claims will receive their share of liquidation trust interests;

• Rodam has agreed in writing to accept the plan and that its claims would be subordinate to all other allowed general unsecured claims. Accordingly, the Rodam claims will not be entitled to any distribution until all other unsecured claims are paid in full in accordance with the plan;

• Holders of subordinated claims will not be entitled to any distribution; and

• All equity interests will be deemed void and canceled, and holders will not retain any property or interest in property under the plan.

Plan comparison

As previously reported, Wet Seal filed a plan of reorganization on Feb. 11, 2015. Monday’s liquidation plan was filed as an amended version of that initial plan.

Wet Seal said in the disclosure statement for the February plan that it intended to continue operations as a reorganized company after the effective date.

The initial plan provided for the full payment of all administrative claims, allowed secured claims, allowed priority tax claims and non-tax priority claims.

All of the existing equity in Wet Seal would have been canceled, and new equity would have been issued in “Reorganized WSI.”

Under a plan sponsorship agreement, B. Riley was to purchase 80% of the new equity in exchange for a mix of $25 million in the form of conversion of the principal amount under its debtor-in-possession facility into equity and cash.

The remaining 20% of new equity was to be issued to holders of allowed general unsecured claims that did not opt for cash payment.

Holders of general unsecured claims that did elect for cash payment and holders of allowed convenience claims would have received a cash payment equal to 5% of the allowed claim amount.

Wet Seal, a Foothill Ranch, Calif., clothing retailer, filed for bankruptcy on Jan. 15, 2015 under Chapter 11 case number 15-10081.

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