Whitehall to Sell Assets; Ponders Liquidation

Following its Chapter 11 filing, Whitehall Jewelers Inc. says it plans to auction its assets—and is considering liquidation if no one steps in to buy it as a “going concern.”

The auction will take place at the office of its law firm, Proskauer Rose, on July 16.

At the auction, Whitehall said it will consider all options, including “funding a plan of reorganization, a sale of all or a portion of [Whitehall’s] as a going concern,” or liquidation.

The company noted that while it has no “going concern” bids at the time of its filing, it already had a bid from a consortium of three liquidators—Great American, Silverman Jewelry Consultants, and Hudson Capital Partners.

The papers said, as of May 3, Whitehall had assets of $207.1 million and liabilities of $185.4 million.

The company has had financial difficulties for some time, it admitted in its papers.

It said that actions to improve its performance included “closing underperforming stores, and strengthening management through the addition of experienced personnel at the executive level and in the merchandising and marketing areas, the repositioning of inventory, improvements in merchandise assortment, and the implementation of various initiatives designed to improve store execution and performance.”

In addition, the company’s bought 78 stores from Friedman’s in April “to strengthen the overall enterprise by combining the best performing stores of Friedman’s/Crescent” with those of Whitehall’s. It also restructured itself financially.

However, Whitehall “continued to experience significant losses and decreased sales,” its filling said. “The general economic downturn and tightening of the credit markets, among other factors, have contributed to a decline in consumer discretionary spending, particularly in the luxury goods sector. Such factors have also contributed to a tightening or elimination of credit terms among the [Whitehall] vendors, restricting the Debtors’ access to new merchandise” and ultimately restricting access to credit.

Whitehall Jewelers, originally founded in 1895 under the name Marks Bros. Jewelers, operates 373 retail stores located in 39 states, including 78 retail locations that were acquired in April 2008 from Friedman’s. It has 2,800 employees.

Whitehall’s largest unsecured creditors include: 

* SDC (Sangam Diamonds Corporation), owed $11.3 million; 
* Kiran Jewels, $9.4 million; Combine International, $7.0 million; 
* Rosy Blue, $6.9 million; and 
* Envisions LLC, $4.5 million.