Do or Die for Finlay?

 

Some comments on the proposed Finlay restructuring, which has not yet been approved as I write this, from informed sources:

 

– From what I’ve heard, the Finlay that is set to emerge out of all this will likely be changed – probably transitioning out of department stores, and becoming more of a (smaller) nationwide guild chain, operating the Baileys, Congress and Carlyle brands.

 

– The head of the New York office of the Israel Diamond Institute wrote that the alternative to this proposed out-of-court restructuring was a Chapter 11 filing. From what I understand, there is an interesting game of chicken here between the bondholders and the vendors.

 

In late December, Finlay’s bondholders  injected more money into the company. Those bondholders legally will receive more protection 90 days after that cash injection – but that could be challenged if there is Chapter 11 filing.

 

Which is why we’re seeing all this activity this week, when, not-so-coincidentally, the 90 days are set to expire. The bondholders wanted to prevent three vendors petitioning to force the company into Chapter 7 (which can be then changed to an 11, as happened in Friedman’s.)

 

– According to reports, this deal only runs through August. While it’s unlikely the economy will have improved significantly by then, it’s possible that Christmas 2009 will be stronger than last year’s, if only because last year’s was so bad.   

 

– And finally, it’s safe to say that what happens with Finlay is being watched by Zale, which is on the hook for the Bailey Banks and Biddle leases in case Finlay fails.  (Zale today also announced the closing of 105 stores and elimination of over 200 jobs.)

UPDATE: The plan, including the exit from department stores, was officially announced this morning

JCK News Director