Friedman’s begins financial restructuring; board member resigns

Friedman’s Inc. has entered into a commitment letter with Farallon Capital Management, L.L.C., an affiliate of one of the lenders under the company’s existing secured credit facility, which could provide as much as $25 to $30 million of additional funding to the company under its credit facility, the Savannah, Ga.-based company said in a statement. The commitment is subject to the satisfaction of numerous conditions, including the approval of the lenders under the company’s existing secured credit facility.

Separately, Peggy Brockschmidt has resigned as a member of Friedman’s board of directors.

The commitment provides for a new layer of financing as part of a restructuring of Friedman’s senior credit facility, together with a program that requires continued support from Friedman’s vendors over the next year. The extent to which the company will be able to draw upon the full amount of additional availability will depend upon, among other things, its ability to enter into acceptable vendor support agreements.

Under the proposed amended and restated credit facility, a portion of the additional money would be reserved pending implementation of a vendor support program. At Friedman’s request, a group of its largest vendors have organized an informal committee and retained counsel to help implement the vendor support program, which would involve a restructuring of money owed as well as the restoration of trade terms.

The amended and restated credit facility would provide for total commitments of $135 million, comprised of a $75 million senior revolving loan and a $60 million junior term loan. While the amount of the total commitment is notionally less than the $150 million under the current credit facility, the institution of reserves under the existing credit facility has made approximately $40 million of the approximately $124 million of current funding permitted under the borrowing base in the existing credit facility unavailable to Friedman’s. Friedman’s says it believes that the revised terms and structure of the facility, together with vendor support, should provide adequate liquidity to move forward, assuming that the required agreements with the Company’s lenders and vendors can be reached over the next month or so to provide adequate time to obtain the inventory required for Friedman’s holiday season sales plan.