Wet Seal is the latest retail chain to fall victim to slowing consumer traffic in our nation’s malls. The company announced today that it has filed for Chapter 11 bankruptcy protection to try to stay afloat. Shares took a nosedive today, falling as much as 54% after the announcement, landing as low as 4 cents a share.

Wet Seal

Wet Seal files for bankruptcy

The company has been having serious problems for some time. It warned investors last month that it might need to file for bankruptcy if it couldn’t fix its cash problems. Wet Seal warned at that time also that it would have to shut down some of its stores. Today’s announcement means the retail chain is officially joining other apparel chains in filing for bankruptcy. Deb Stores and Delia’s Inc. both filed for Chapter 11 last month.

Unlike those other teen apparel retailers, however, Wet Seal said it has a financing offer from B. Riley Co. that might make it possible for it to save some of its business, reports The Wall Street Journal. The court filing states that the firm’s financing gives the retail chain “an option to continue as a going concern and potentially generate a recovery for constituents.”

Wet Seal reveals turnaround strategy

In order to save its business, Wet Seal will try to reorganize and focus on its e-commerce business. The company will also focus more on the stores that perform much better than others, according to the court documents.

Earlier this month, Wet Seal shut down more than 300 stores. The locations that are still open, in addition to the retailer’s website, make up over half of its net sales for the nine months ending Nov. 1, according to the court documents.

Terms of Wet Seal’s financing

Under the terms of the financing, B. Riley said it will deliver up to $20 million in a term loan. If Wet Seal’s turnaround strategy ends up working, that loan will be converted into 80% of the equity in the new company. In addition, the financing offers new letter-of-credit commitments of up to $7.5 million.

The other 20% of the equity will go to general unsecured creditors. According to court filings reviewed by The Wall Street Journal, some of those who might be getting in line for shares of the equity might be investors who own the almost $29 million in senior convertible notes that are out. Also Wet Seal apparently owes trade creditors over $31 million.

However, these numbers don’t include and of the claims from landlords of the stores the retailer closed suddenly earlier this month.