A bankruptcy court has confirmed Friedman’s Inc. reorganization plan, setting the stage for the retailer’s emergence from Chapter 11 by the end of the year, the company said in a statement Friday.
The U.S. Bankruptcy Court for the Southern District of Georgia, Savannah Division, approved Friedman’s plan under certain conditions that include closing on its $125 million exit financing facility with CIT (a financial services company) and resolving claims filed by the Internal Revenue Service. Friedman’s filed voluntary chapter 11 petitions on behalf of itself and seven of its subsidiaries on Jan. 14, 2005.
The company also said that it plans to close 51 underperforming stores following the Christmas holiday shopping season, emerging from bankruptcy with 424 stores.
“The decision to close stores is always a difficult one, but while Friedman’s is in chapter 11 it has the opportunity to deal with unproductive real estate assets. Once we emerge from bankruptcy, this opportunity will no longer be available,” said Sam Cusano, Friedman’s CEO.
He added, “Unlike past store closing programs, there will be no going out of business or inventory liquidation sales. We feel very good about the merchandise we now have in the stores. This is not a situation where we have a need to dispose of slow moving or unproductive inventory, so we will simply integrate any remaining inventory into the ongoing stores,”
On Wednesday, the company said it settled fraud charges with the U.S. Attorney’s Office for the Eastern District of New York and the Securities and Exchange Commission.
Friedman’s settled its case with the U.S. Attorney’s Office by agreeing to pay $2 million to the United States Postal Inspection Service Consumer Fraud Fund to settle support fraud prevention and consumer education initiatives, and to make certain reforms to its corporate governance and financial accounting controls.
Under the terms of the SEC agreement, no monetary fines will be imposed on the Friedman’s, but it has consented to a permanent injunction against future violations of the antifraud, reporting, books and records, and internal control provisions of federal securities laws and other relief.
“Reaching agreement with the SEC and EDNY and having our plan of reorganization confirmed by the bankruptcy court are major steps forward in our efforts to restructure Friedman’s,” Cusano said. “We believe Friedman’s has a bright future and are excited about the opportunity to put the bankruptcy portion of our restructuring behind us and focus on improving and growing the business.”