Struggling teen retailer Pacific Sunwear of California Inc. said Thursday it would file for bankruptcy, in an effort to reduce its long-term debt by 65% and lower operating costs to "better match the shifting retail landscape."

In a debt-for-equity restructuring agreement with Golden Gate Capital, the lender agreed to convert 65% of the company's debt into equity of the reorganized company. Golden Gate will also provide at least $20 million to the company once it emerges from chapter 11.

Pacific Sunwear also said it received a commitment of $100 million in debtor-in-possession financing from Wells Fargo Bank, which the company plans to draw from as needed to manage seasonal swings in cash flow. Wells Fargo also committed to provider a five-year, $100 million revolving line of credit after the company emerges from bankruptcy.

The company said that while it sought chapter 11 protection it would operate its business without interruption to customers, vendors, employees and other partners throughout the process. The Wall Street Journal earlier this week reported the retailer was looking for chapter 11 protection.

Chief Executive Gary Schoenfeld called the plan "promising" in a statement Thursday.

"Due to our team's hard work and unique brand partnerships, PacSun is the only one of our direct retail competitors to achieve compounded positive same-store sales over the past four years," Mr. Schoenfeld said. "Through this restructuring, however, we plan to solve the two structural issues that operationally we could not fix on our own."

He also said the company sought to reduce occupancy costs, "either through landlord negotiations or lease rejections, appropriately adjusting the fixed costs of operating our stores to better match the shifting retail landscape."

Pacific Sunwear's debt load consists of a $100 million revolving loan with Wells Fargo Bank NA, and a $60 million term loan backed by private-equity firm Golden Gate Capital, both of which mature in December.

The Anaheim, Calif.-based retailer also said Thursday that same-store sales for the fourth quarter of fiscal 2015 had edged up 0.2%. The company ended the fourth quarter with 601 stores versus 605 stores a year ago.

Write to Joshua Jamerson at joshua.jamerson@wsj.com

(END) Dow Jones Newswires

April 07, 2016 07:35 ET (11:35 GMT)

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