Excerpts from its latest 10Q …

On June 1, 2009, the semi-annual interest payment of $1.7 million was due to the holders of the Senior Notes and was not paid by Finlay Jewelry. The indenture relating to the Senior Notes provides for a 30-day grace period. It is unlikely that Finlay Jewelry will make the interest payment within the grace period. Failure to make the payment within the 30-day grace period will trigger an event of default under the indenture relating to the Senior Notes and an event of default under the Revolving Credit Agreement. If this were to occur, the trustee or the holders of at least 25% of the outstanding Senior Notes may declare the Senior Notes to be immediately due and payable and the lenders under the Revolving Credit Agreement may accelerate repayment of the current outstanding balance. Additionally, an acceleration of the Senior Notes will constitute an event of default under the Secured Notes. …

Effective with the February 2009 amendment to the Revolving Credit Agreement, we are required to achieve certain weekly targeted percentages of our sales and cash receipts and maintain cash disbursements below certain targeted percentages as set forth in our operating plan, and we are currently in default of this covenant. Although the lenders reserve all rights and remedies under the Revolving Credit Agreement and can accelerate repayment of the outstanding balance at any time, they have not exercised such rights at this time other than to impose the default interest rate under the Revolving Credit Agreement effective June 1, 2009. … As a result of cross-default provisions, an acceleration would enable the holders of our long-term debt to declare a default and demand repayment as well ..

There can be no assurances that we will be able to obtain alternate financing on terms acceptable to us. In the event that we are unable to secure adequate borrowing under the Revolving Credit Agreement or an alternate financing source, our cash flows from operations may be inadequate to meet our obligations, which may prevent us from operating. …

In conjunction with the execution of our strategic plan, we have initiated a formal process whereby parties may indicate their interest in our business or assets ….

Rob Bates

JCK News Director