SANTA ANA — Ocean Pacific Sunwear, once the undisputed king of the surf-wear industry, won bankruptcy court approval Tuesday to sell its remaining assets to Berkeley Capital Corp. in San Francisco for $17.1 million.
In February, Berkeley agreed to pay $21 million in cash and notes for OP's trademarks and licenses. But the investment group lowered its bid after determining that OP's financial projections were "overly optimistic," according to recent bankruptcy court filings.
OP, based in Irvine, will use proceeds from the sale to pay its creditors. Wells Fargo Bank will receive about $4.6 million, and Republic Factors Corp. will receive $2.1 million, according to the agreement approved Tuesday by Judge James N. Barr at U.S. Bankruptcy Court in Santa Ana.
In recent court filings, Berkeley and OP executives tied the lower-than-anticipated purchase price to the surf-wear company's deteriorating financial condition. Revenue for 1993, once forecast to hit $172.7 million, will probably be closer to $120 million. Yearly cash flow that was supposed to reach $4.6 million will likely be about $400,000, court filings indicate.
Berkeley executives said they think a prompt sale will end "uncertainty" among consumers and manufacturers since OP's bankruptcy filing in November. Speculation about OP's fate has diminished the company's value, according to the filing; if the deal isn't completed quickly, Berkeley might determine that the purchase is "wholly unattractive."
Berkeley executives also want to take charge of OP products being developed for sale next spring. The new product line is important because clothing and accessories now being designed by OP will generate more than half of 1994 sales for the OP line.
When the sale is completed, OP's widely recognized logo will be transferred to Berkeley, a subsidiary of Britain's Govett & Co., a financial-services firm. As was the case with OP, Berkeley will license other companies to manufacture merchandise bearing the distinctive OP logo.
Most of OP's 30 employees will remain at work in the company's Irvine office and become employees of the new owner, OP Vice President Mike Balmages said Tuesday.
The old OP business will remain in bankruptcy until a reorganization is completed, but the company will be little more than a shell that houses bookkeeping functions, Balmages said.
OP Founder and Chairman Jim Jenks, who was in bankruptcy court on Tuesday, described the sale as "good for everyone."
Jenks will remain active in the apparel industry through Newport Blue, an OP division that was created in 1985 to manufacture California lifestyle sportswear for men.
According to court documents, Jenks had hoped to purchase the Newport Blue licensing operation from OP. Jenks said Tuesday that negotiations on his role at Newport Blue haven't been concluded. "I'll be working with Newport, but we're still working details out," Jenks said. "I'm really excited by Newport Blue's potential."
The asset sale approved Tuesday drew no opposition from Elaine Ornitz, who owns about 30% of OP. Ornitz, in a civil suit, has alleged mismanagement by OP executives.
Founded by Jenks in 1972, OP successfully rode the surf-wear craze during the '70s and '80s by licensing its trademarks to clothing and apparel manufacturers.
The company ran into trouble in the late '80s when it unsuccessfully moved into manufacturing.