Gottschalks Inc., the regional department store chain headquartered in Fresno, California, announced that it filed to reorganize under bankruptcy protection, and said that it will pursue the possibility of company’s sale or another transaction. Now Gottschalks is seeking permission for the court to conduct an auction of the company around March 17.
In November 2008, the company had reached an agreement with British Virgin Islands-registered corporation Everbright Development Overseas Ltd., providing financial and logistical services for US-China merchants and manufacturers. The BVI company was going to invest up to $30 million in Gottschalks Inc. – for the exchange of about 29% of Gottschalk’s common stock. As a result of the deal, Everbright would have owned 75% of company’s common stock. However a month ago this deal fell through on Everbright’s initiative, although Gottschalks remained in discussions with Everbright, as well as with another party. According to some sources, this was El Corte Ingles, Spain’s largest department store retailer which owns about a 16% stake in the California retail chain. Gottschalks could not be reached for comments to prove this information.
In the continuing economy downturn, failing of the purchase agreement with the BVI-registered Everbright became one of the reasons of Gottschalks’ falling down. Now the shares of the company fell 39%.
Gottschalks, which operates 58 department stores and three specialty apparel stores in the western United States, hopes to continue conducting business as usual without interruption while reorganizing and trying to find a third-party investor or sell the business.