Wednesday, February 25, 2009

Harbinger Set To Execute Debt-For-Diamonds Swap

Rumors have swirled today that mall jewelry retailer Finlay, owner of such chains as Bailey Banks and Biddle, Carlyle and Congress, may file bankruptcy as early as tomorrow, and the only thing preventing it from filing is the hope that its vendors, who are owed $25 million, will agree to receive that money in delayed installments over the next 180 days. The vendor negotiations were first presented in a report circulated by Israeli Diamond Industry. In addition to having no cash to satisfy working capital needs, Finlay has over $520 million in debt, which it amassed after a terminally mistimed acquisition of the premium jewelry chain Bailey Banks and Biddle in 2007.

Interestingly, the company's largest creditors are troubled GE Capital, and Phil Falcone's Harbinger. The two have agreed to wait before forcing Finlay to share in Fortunoff's liquidation fate, however the delay is dependent on the vendors agreeing to essentially provide the company with gold and diamond jewelry for free... If anyone has ever been to 47th street, they will tell you why these hopes may end up being prematurely dashed. It is unclear if Phil will agree to some sort of Debt-for-Diamonds or comparable jewelry exchange is a Chapter 11 fate is unavoidable. Alternatively, a bankruptcy with the ensuing firesale of the entire inventory will likely make life for comparable publicly traded mid-range jewelry retailer Zale's (and major shareholder Breeden Capital) even nastier. Sphere: Related Content
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