Finlay Enterprises, Inc. announced its strategic plan to exit its leased department store business over the near-term and will focus solely on its specialty jewelry stores business going forward.

“Given the decline in our department store business over the past five years coupled with the strenuous economic conditions under which we are currently operating, we view our strategic plan to exit this business segment as a necessary measure to strengthen our company,” said Arthur E. Reiner, Finlay chairman and chief executive officer. “We are working closely with all of our long-time department store partners to ensure a smooth and successful exit. In addition, we anticipate closing approximately 40 of the less profitable specialty store locations. We believe that our plan will make our Company stronger as we fully transition to a specialty jewelry store business.”

The company said it continues to carefully manage its planned expenditures and will reduce its cost structure to levels appropriate to support its specialty jewelry store business. It will reduce headcount chiefly in the administrative functions at the its New York headquarters as well as sales associate positions in the affected department and specialty store locations.

“We wish to sincerely thank our dedicated and loyal employees for their service to Finlay and regret the impact that today’s announcement will have on those affected. However, given our options, we are taking essential measures to best position our Company over the long-term,” Reiner said.

In connection with its strategic plan, the company entered into a limited consent and amendment to its Fourth Amended and Restated Credit Agreement. The Amendment, which reduces the available commitments to $300 million and amends the termination date to Feb. 25, 2010, permits the company to effect changes to its business as part of its strategic plan.

Also in connection with its strategic plan, the company and a majority of the holders of its 8.375%/8.945% Senior Secured Third Lien Notes Due June 1, 2012, entered into agreements with a majority of its trade vendors, pursuant to which the company granted such vendors a third priority lien on its and its subsidiaries’ assets in accordance with the terms of the Senior Secured Third Lien Notes.

Finlay Enterprises, Inc., through its wholly-owned subsidiary, Finlay Fine Jewelry Corporation, is one of the leading retailers of fine jewelry operating luxury stand-alone specialty jewelry stores and licensed fine jewelry departments in department stores in the United States. The number of locations at the end of January 2009 totaled 674, including 69 Bailey Banks & Biddle, 34 Carlyle and five Congress specialty jewelry stores.

JCK