Friedman’s Exits Chapter 11
By Rob Bates -- JCK Online, 2/1/2006 2:00:00 AM
Less than a year after filing for Chapter 11 bankruptcy protection, jewelry retailer Friedman’s has emerged as a private company two-thirds its former size.
The new chain will have 424 stores. Some 51 underperforming units were slated to close after the holiday season. When Friedman’s first filed for Chapter 11, it had 652 stores.
The Savannah, Ga., retailer, the country’s third largest jeweler, filed for bankruptcy Jan. 14, 2005. As part of its emergence from Chapter 11, it has canceled all outstanding common stock. Most of that stock is being taken over by Harbert Distressed Investment Master Fund, which specializes in restructuring and turnarounds.
Also in conjunction with its emergence from Chapter 11, the company closed $125 million in financing from the CIT group.
CEO Sam Cusano said the company now had “a significantly less leveraged balance sheet” and “cash to fund operations and an improved operational structure.” He called exiting Chapter 11 in less than a year “a considerable achievement, especially for a retailer.”
Friedman’s has also settled many of its legal problems. It recently reached an agreement with the Securities and Exchange Commission over past accounting practices. In addition, an agreement with the New York U.S. Attorney’s office requires the company to pay $2 million to the United States Postal Inspection Service’s Consumer Fraud Fund and to make certain reforms.
