Golden Gate Capital is looking to sell all or part of its 25 percent share in Zale Corp., according to a document filed Oct. 2 with the Securities and Exchange Commission.
Golden Gate, which made the $150 million loan in 2010 generally credited with helping rescue the troubled company, currently controls warrants that cover some 11.1 million Zale shares.
Zale director of investor relations Roxane Barry says that her company does not know how many shares Golden Gate will sell. While a sale is unlikely to affect the loan agreement (which was revised in 2012), it could change the makeup of the company’s board. Zale board members serve one-year terms, and the investment company currently has two members on the board.
“The agreement is that if they sell two-thirds of their warrants, they no longer have a contractual right to have people on the board,” Barry says. “At this point, I can’t speculate. If they sell the two-thirds, I’m not sure what will happen with their seats.”
She stressed that Zale is not planning to issue any additional shares.
“This should not surprise investors, because these warrants are out there,” Barry says. “These warrants are already in our diluted share count. It does not cause further dilution.”
And, Barry notes, Golden Gate looks to make a nice profit on the sale: The warrants’ “strike price” is $2. At press time, the stock was trading over $14.