Friedman’s Inc. has secured, at least tentatively, about $40 million in financing from Citibank to provide cash flow and fund operations while it is in Chapter 11, the Savannah Morning News reported Friday.
The debtor-in-possession (DIP) financing was secured at a Friday hearing in the U.S. Bankruptcy Court for the Southern District in Savannah, the newspaper reports. There had been two lenders competing for the Savannah-based retailer’s business. Farallon Capital Management LLC, one of Friedman’s lenders before it filed for bankruptcy protection, was the other contender.
While Judge Lamar W. Davis Jr. expected to preside over a preliminary financing hearing Friday, attorneys for Friedman’s, its lenders, and creditors spent the day locked in meeting rooms, the newspaper reports.
The order will not be finalized until Davis approves it, which he is expected to do. A final DIP financing hearing is set for Feb. 18.
“We’re very pleased,” Friedman’s CEO and President Sam Cusano, reportedly said. “There was a lot of give and take, and the company will be able to move forward.”
Glenn Rice, with New York based Otterbourg Steindler Houston & Rosen P.C., lead counsel for the informal committee of Friedman’s unsecured creditors, reportedly called the agreement “an excellent start along the road.” He added that the sum “ought to provide the company with liquidity.”
The $40 million is large enough to allow the stores to buy inventory for Valentine’s and Mother’s Day, Brenda Adrian, a spokeswoman for Friedman’s with Sitrick and Co., a public relations firm, reportedly said. The PR firm specializes in crisis communications.
Friedman’s reportedly listed total assets of $395.8 million and total debts of $215.7 million. A self-imposed target date of the first quarter of 2006 has been set by the company to emerge from Chapter 11.
On Monday, Asst. U.S. Trustee Amon James is expected to appoint the formal creditor’s committee, the newspaper reports. The committee, which consists of about seven volunteers, is chosen from the largest 30 creditors. In large or complex bankruptcy cases, an even larger number of members may be appointed. Under bankruptcy code, a creditor hearing is held within 40 days of the filing. Judge Davis gave Friedman’s Inc. an extension on providing creditors with the company’s financial schedules. As a result, no meeting will be set until after the group has had about a week to examine them.