Whitehall Jewellers, Inc. said Monday it has learned that Newcastle Capital Management LP’s potential lender will not proceed with its proposal to finance Newcastle’s replacement of Whitehall’s senior credit facility.

Whitehall said Newcastle initiated an unsolicited tender offer for Whitehall stock conditioned, in part, on its ability to replace Whitehall’s existing financing.

Whitehall’s Board recommended that its stockholders not tender their shares to Newcastle, but instead submit their proxies authorizing Whitehall to vote their shares in favor of the Company’s proposals at the Special Meeting of Shareholders on Jan. 19.

“The Board has consistently indicated its willingness to consider a binding offer that has a commitment for the refinancing and the other funds needed to close the transaction within the time frame required. In view of this development, the Board believes that Newcastle’s offer is not capable of closing,” said Daniel Levy, Chairman of the Board of Whitehall

Whitehall has previously recommended shareholders accept a financing deal with Prentice Capital Management and Holzman Opportunity Fund.

JCK