Finlay Enterprises has failed to make a $1.7 million interest payment on its Senior Notes due on July 1 – which constitutes a default under the indenture governing the Senior Notes and its Revolving Credit Agreement.
“Finlay Jewelry does not intend to make the interest payment on the Senior Note,” the company added.
Finlay notes that, in a default, the trustee or holders of at least 25% of the notes have the right to declare them immediately due and payable. While Finlay notes that hasn’t happened yet, an acceleration of the Senior Notes would be considered a default under the terms of its Senior Secured Second Lien Notes and Senior Secured Third Lien Notes.
While this latest event constitutes a default under Finlay’s Revolving Credit Agreement, Finlay notes it has also been in default of another covenant under the Revolving Credit Agreement since February. That covenant requires the achievement of certain weekly targeted percentages of sales and cash receipts and maintenance of cash disbursements below certain targeted percentages.
Finlay has previously said that there was “substantial doubt about [its] ability to continue as a going concern” and announced that it was launching a formal process to sell its assets. In February it announced it was exiting its long standing department store business.