Gottschalks granted interim approval of $125 million DIP loan; final hearing Feb. 12

By Caroline Salls

Pittsburgh, Jan. 15 - Gottschalks Inc. received interim approval of its $125 million debtor-in- possession revolving credit facility, as well as approval of other "first-day" motions, according to a company news release.

The final hearing on approval of the DIP facility is scheduled for Feb. 12.

The DIP financing will be provided by a group of lenders led by GE Capital Corp., and the financing will be used to fund the company's working capital requirements, including employee wages and benefits, vendor payments and other operating expenses, during the reorganization process.

The DIP financing will expire at the earliest of July 2009, 30 days after the bankruptcy filing date if a final order has not been entered, the close of the first business day after final approval if the required fees have not been paid, the date of confirmation of a plan of reorganization that does not call for the loan to be paid in full, upon closing of a sale of substantially all company assets and either on the effective date of a plan of reorganization that does repay the loan in full or 60 days after confirmation if the effective date has not occurred.

Interest will be Libor plus 400 basis points.

Gottschalks will pay a 2% closing fee.

Among other first-day motions, Gottschalks received approval to continue to make wage and salary payments and continue various benefits for employees, as well as honor customer programs, including returns, exchanges and gift cards.

"These approvals will ensure that we are able to operate on a normalized basis as we pursue options to create value for stakeholders, including a potential sale of the business," chairman and chief executive officer Jim Famalette said in the release.

Gottschalks, a Fresno, Calif.-based regional department store chain, filed for bankruptcy on Jan. 13 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 09-10157.

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