Update to include details from bankruptcy court documents.

Executives involved with now-bankrupt teen apparel chain Pacific Sunwear (PSUN) tried to put a positive spin on its future, but the underlying numbers suggest otherwise.  

On Thursday, the struggling retailer filed for Chapter 11 bankruptcy in an attempt to shed some of the costs related to under-performing stores and gain access to badly-needed capital to make it to the key holiday selling season.  

As part of the reorganization plan, private equity firm Golden Capital -- which had extended a $60 million loan to PacSun in 2011 -- will convert 65% of its debt into equity, effectively giving it control of the company once it emerges bankruptcy in about 4-6 months, a source close to the matter said. It will also provide a minimum of $20 million in additional capital upon PacSun's emergence from Chapter 11.  

Wells Fargo has also committed $100 million in debtor-in-possession financing, as well as a five-year $100 million revolving line of credit.    

PacSun said the reorganization plan will allow it to address "very high occupancy" costs of some $140 million a year, while foregoing having to dole out cash it didn't have to service $90 million in debt coming due later this year. The company did not disclose how many stores it intends to close as part of the reorganization process or the number of expected layoffs. On Friday, the courts are expected to hear PacSun's bankruptcy motion. 

Both PacSun and Golden Capital did their best to put a positive spin on the situation.

"We have been making significant strides over the past several years to improve performance -- due to our team's hard work and unique brand partnerships, PacSun is the only one of our direct retail competitors to achieve compounded positive same-store-sales over the past four years," said PacSun's president and CEO Gary H. Schoenfeld, who will be leading the reorganization.  

Said Josh Olshansky, managing director at Golden Gate Capital, "PacSun has successfully transitioned beyond its historical base of action sports brands to what we believe is the most relevant and coveted mix of brands celebrating the California lifestyle -- we believe in the future of the company, as reflected by our significant injection of new capital into the business."

Unfortunately, PacSun's financials and documents filed with the courts paint a different story, and call into question the prudence of Golden Gate's investment. 

PacSun said that same-store sales for the fourth quarter rose by 0.2%, in the middle of guidance shared in December for a decline of 3% to an increase of 3%. The company lost $10 million, or 14 cents a share, during the fourth quarter. 

"Our slightly positive comp store sales performance was at the better end of what many retailers experienced over the holiday season, which continues to validate our core strategies as we re-establish the new PacSun," said Schoenfeld.

But PacSun's same-store sales increase was nothing to write home about -- competitors American Eagle Outfitters (AEO) - Get Report and Abercrombie & Fitch's (ANF) - Get Report  Hollister division each delivered same-store sales gains of 4% for the fourth quarter. 

PacSun's cash flow plunged to a mere $6 million at quarter end from $11 million in the third quarter. 

In court filings, Pacific Sunwear blamed its struggles on several fundamental changes occurring in retail. 

First, said PacSun, the continuing shift in consumer behavior away from shopping at malls toward online has negatively impacted sales in its retail stores. Second, increased competition throughout the specialty retail industry, and particularly the emergence of fast fashion retailers, have hurt PacSun. Third, greater online shopping and a sluggish U.S. economy have made operating a large number of retail stores very costly.

Fourth, PacSun said that the entrance and rapid growth of numerous international brands and retailers have weighed on it its results. Fifth, the company's core customer base of teens and young adults has shifted a larger portion of their discretionary spending to dining, technology, and other consumer products, and away from retail apparel. And finally, the action sports segment of the retail industry, which fueled PacSun's early success, is no longer as relevant as it had previously been.

The bankruptcy news comes just a few months before the start to the critical back-to-school shopping season, and should be little surprise.

Pacific Sunwear has for years has struggled to connect with teens opting for trendy and cheap fashion pieces from H&M and Forever21, instead of the company's more expensive looks inspired by California lifestyles.

The company has not been profitable since the height of the consumer spending boom in 2006, when it operated about 965 stores. Today, it operates about 601 stores, a number that may fall drastically by the time it emerges from bankruptcy, judging by precedents set by once-bankrupt Wet Seal and American Apparel

PacSun isn't the only once popular teen apparel brand hanging by a thread. In mid-March, Aeropostale (ARO - Get Report) said it was exploring a potential sale of the company following a very disappointing holiday season that has left it in a precarious financial position.