Friedman’s says it anticipates credit default; names new CFO

Friedman’s Inc. said on Tuesday that it anticipates a default under some provisions in its credit facility.

In addition, the Savannah, Georgia-based retailer named Richard Hettlinger as its chief financial officer. He replaces Richard Cartoon who resigned in May after five months on the job.

Friedman’s, which is subject of fraud investigations by the U.S. Securities and Exchange Commission and Justice Department, said in a statement it expects it will fail to meet cumulative EBITDA (earnings before interest tax depreciation and amortization) requirements for the period ended Oct. 30, which would constitute a default under its term loan.

The company said it also expects to fail to meet a minimum ratio of accounts payable to inventory as of Oct. 30, constituting a default under its term loan and revolving loan.

The retailer said it is in talks with senior lenders on amending its covenants to eliminate the default.

Friedman’s said it expects continued pressure on sales and EBITDA as it works on a “more prudent” credit program, Chief Executive Officer Sam Cusano said in the statement. The company has been working with vendors to get inventory levels back to more normal levels, Cusano said.

Hettlinger, the new CFO, is a retail veteran with more than 30 years of experience. He served most recently as CFO of The Walking Company. He previously served as CFO of Paul Harris Stores, and three divisions of The May Department Stores: the Famous-Barr Company, L.S. Ayres and M. O’Neil Company, as well as serving as president and CEO of Heartland Industries.