A long-time observer of Zale writes in with this interesting perspective, which he cautions is his opinion:
Current wisdom is that [Zale director Richard] Breeden has reassured the banks, so they won’t pull the plug, at least not yet. He probably is one of the more connected guys in the financial industry…
The trade needs to be especially careful. Subordinated trade debt is only valuable if there is excess money to distribute in the event of a bankruptcy. Look to see Breeden [who owns 28% of company stock] try to get more money out of the company, rather than reinvest more in it. He’s buying time to reduce his loss, not turn the business around, at least the way you and I think about it. Last, don’t kid yourself, this guy is very savvy and ruthless. He buys and sells money and money has no smell, no feelings, or relationships either. It’s just business.
Understand, while Zale is a public company, it is very closely held with 3 institutions controlling over 54.1% of the stock. Of the 7 board members, 2 are hedge fund people, 1 is a CFO, and another is a venture capital guy. That leaves a plumber, an academic, and a diamond cutter… God help them.
In other Zale news, David Sternblitz, the company’s long-time vice president and treasurer, has left the company. As official spokesman, he always patiently answered my questions, and I wish him well.
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