The nation's biggest name in surf wear, Ocean Pacific Sunwear Ltd., filed for Chapter 11 protection from creditors Wednesday, saying it was having trouble paying off its long-term debt and needed to fend off a lawsuit from its largest shareholder.
The Tustin-based company, a leading force in the California life style apparel market since the early 1980s, listed about $11 million in debts to two secured creditors and scores of unsecured creditors in its petition filed in U.S. Bankruptcy Court in Santa Ana.
During the reorganization, Ocean Pacific said it would maintain its work force of 60 and network of 12 domestic and 19 international licensees, the companies that place Ocean Pacific's brand names on products ranging from corduroy shorts to T-shirts. The company intends to continue its sponsorship of the popular OP Pro surfing contest, to be held next month in Huntington Beach.
"This is a smart move for us," OP Chairman and co-founder Jim Jenks said in a statement. "It clears up some old problems while allowing the company to move ahead."
Ocean Pacific licenses clothing under the Newport Blue and OP Pro labels and is in the process of trying to sell two other brand names, Jimmy Z apparel and Hydrolight wet suits.
The company blamed its cumbersome debt on an ill-fated attempt at reviving its own manufacturing operations in 1985. The company discontinued making its own apparel for a second time in 1989, and limited itself to assisting in the design of its clothing line and marketing and collecting royalties on the use of its logos.
Last year, Ocean Pacific was sued by its largest shareholder, Elaine Ornitz, widow of former OP Chairman Larry Ornitz, who alleged that the company was basically insolvent. OP officials have denied the charges.
OP Senior Vice President Mike Balmages said Wednesday that filing for bankruptcy protection would forestall the costs arising from legal defense in its court case, while protecting the company's chief assets--its well-known trademarks--from foreclosure.
Ornitz, in a statement issued through lawyer Bruce Vann, said litigation will continue against each of the individual Ocean Pacific partners, and she expects to prevail.
Ocean Pacific products are sold in 73 countries. Balmages said licensees' worldwide sales last year were about $250 million, and are expected to be about the same this year.