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Pacific Sunwear of California Inc., a retailer with surf-inspired clothing, has hired financial advisers ahead of maturing debt load as the company continues to struggle amid a downturn in the teen retail industry.

The publicly traded retailer is working with restructuring firm FTI Consulting Inc. and investment bank Guggenheim Securities to get a handle on $160 million in debt slated to mature later this year. The company is weighing its options whether to restructure the debt outside of court, or as part of a restructuring under chapter 11, according to people familiar with the situation.

Pacific Sunwear, FTI Consulting, Guggenheim and the company's lenders declined to comment on the situation.

Troubled companies often use the threat of bankruptcy to increase their leverage with creditors in restructuring talks. The company has made no decision regarding the matter, and is still in early discussions with advisers, the people said.

Still, Pacific Sunwear, whose stock traded at 21 cents a share late Friday morning, needs help. The company's performance weakened during the financial crisis, and it has been unable to fully rebound ever since, one of the people said. The company has had three consecutive quarters of declining sales, negative comparable-store sales, and a looming debt maturity and interest payment.

The retailer's $100 million revolving loan with Wells Fargo Bank N.A. and $60 million term loan backed by private-equity firm Golden Gate Capital mature in December. When the Golden Gate-backed term loan matures, the company will be required to make a $27 million paid-in-kind interest payment.

As teens turn to pouring money into electronics and athletic wear, the apparel retailers continue to struggle. Since 2014 numerous retailers in the sector have filed for bankruptcy, such as Wet Seal, dELiA*s Inc., Deb Shops, and Cache, Inc.

Last year surfwear and skatewear retailer Quiksilver Inc., filed for bankruptcy after working for years to turn around the business. In January it won approval to exit bankruptcy with a plan to restructure its $800 million in debt under the new ownership of private-equity owner Oaktree Capital Management.

Earlier this week, Abercrombie & Fitch Co. announced that its full-year net sales fell 2% and plans to close about 60 stores in the U.S.

Pacific Sunwear was able to stave it off its financial difficulties four years ago when it closed nearly 200 stores and rolled out new campaigns and clothing lines, including the widely marketed "Kendall and Kylie Collection," from the half-sisters of the Kardashians.

However, this was only a short term solution for the Anaheim, Calif.-based retailer, an analyst said.

"We feel that a more comprehensive restructuring may be necessary at PSun and the form of such a morphing is unknown at this juncture," B. Riley & Co. analyst Jeff Van Sinderen said in a December report.

Pacific Sunwear's management said in its latest quarterly earnings call it hoped the holiday season would boost sales. But the company, with some $11 million in its coffers, said that if comparable-store sales and sales declined it could fail to meet its debt requirements and cash could dwindle.

It already has $35 million borrowed under the revolver and said in its last quarterly earnings release it would likely draw more on the revolver to use for holiday inventory, although it planned to pay it back. The facility also contains a covenant, or loan requirement, that Pacific Sunwear must maintain at least a $10 million balance on the facility. As of Oct. 31, Pacific Sunwear had $22 million available on the loan.

Pacific Sunwear, which had sales of $826.8 million in 2014, hasn't released its fourth quarter 2015 and full-year results.

The company said last year that it hoped to complete the sale or lease-back of its headquarters in Anaheim and distribution facility in Olathe, Kan., to pump more cash into the company. However, Chief Executive Gary Schoenfeld said during the third quarter conference call that it was "still in discussions" regarding the sale or lease-back of the locations.

Pacific Sunwear also implemented an annual cost reduction program during fiscal 2015, which it believes will yield about $15 million in annual savings, according to a filing.

Write to Lillian Rizzo at Lillian.Rizzo@wsj.com

(END) Dow Jones Newswires

March 04, 2016 12:15 ET (17:15 GMT)

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