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Friedman's Existing Lenders Approve Proposed Credit Agreement
Restructuring
Company and Existing Lenders Agree to Interim Forbearance Agreement
SAVANNAH, Ga., Aug. 20 /PRNewswire-FirstCall/ -- Friedman's Inc. (OTC:FRDM),
the Value Leader in fine jewelry retailing, today announced that its existing
lenders have agreed to the terms of the restructuring of the Company's existing
secured credit facility contemplated by a commitment letter entered into with
Farallon Capital Management, L.L.C. ("Farallon"), an affiliate of one of the
lenders under the existing facility. As previously announced on August 5, the
Amended and Restated Credit Facility would provide for total commitments of up
to $135 million comprised of a senior revolving loan of up to $75 million and a
$60 million junior term loan. The proposed transaction remains subject to
negotiation and execution of definitive documentation and the satisfaction of
customary closing conditions by August 31, 2004.
(Logo: http://www.newscom.com/cgi-bin/prnh/20020215/FRIEDMANLOGO )
The Company announced that it has also entered into a Forbearance Agreement
with the lenders under its existing amended and restated credit agreement which
provides that the lenders will forbear from exercising their remedies with
respect to any existing default until the earlier of August 31, 2004 or the
occurrence of a new default. Under the Forbearance Agreement, Friedman's is
required to complete the proposed restructuring transaction by August 31, 2004.
The extent to which Friedman's will be able to draw upon the availability under
the restructured credit facility will depend upon, among other things, the
Company's ability to enter into mutually acceptable vendor support agreements.
The Company is in active discussions regarding implementation of the Company's
vendor support program with an informal committee of creditors formed at
Friedman's request.
Mr. Sam Cusano, Friedman's CEO, said, "Friedman's greatly appreciates the
support that our lenders have given to the Company and their commitment to
making our proposed restructuring a success. We remain focused on completing
definitive documentation and satisfying the closing conditions for our
restructuring credit facility as well as successfully completing negotiations
with our creditors regarding implementation of our vendor support program."
Separately, Friedman's commented on its investment in Crescent Jewelers in
light of Crescent's announcement last week that Crescent has filed a Chapter 11
bankruptcy reorganization case. Friedman's intends to actively participate in
Crescent's chapter 11 case with the objective of maximizing the value of
Friedman's claims and interests in Crescent for the benefit of Friedman's
stakeholders. Friedman's appeared at Crescent's first day hearing held on
August 16, 2004 in the United States Bankruptcy Court for the Northern District
of California to support entry of interim relief on various first day motions
filed by Crescent.
Friedman's also said that it planned to continue to provide certain services
relating to accounting and information technology support, certain other
back-office processing services and to permit Crescent to use Friedman's "The
Value Leader" trademark on an interim basis subject to the Bankruptcy Court's
approval of appropriate agreements that would authorize Crescent to assume the
agreements and perform its related obligations on mutually acceptable terms.
Crescent is currently in default of the payments required under these
agreements and has asserted that it has claims on account of and defenses to
payment in connection with the agreements.
Friedman's holds Crescent's Series A preferred stock which it acquired for $50
million in August, 2002, as well as a warrant which it acquired in 1999 to
purchase 50% of the non-voting capital stock of Crescent Jewelers, Inc., a
Delaware corporation, the owner of 100% of the common stock of Crescent, for
$500,000. The warrant remains outstanding and unexercised, and was received by
Friedman's in connection with credit enhancements previously extended by
Friedman's on behalf of Crescent. Friedman's also presently has debt claims
against Crescent in the amount of approximately $48 million. These debt claims
consist of a senior subordinated note in the principal amount of $36.3 million
issued by Crescent as well as accrued and unpaid amounts on account of
dividends on the preferred stock, interest on the subordinated note, and under
contractual arrangements between Friedman's and Crescent.
On March 16, 2004, Friedman's reported in a Current Report on Form 8-K filed
with the Securities and Exchange Commission that it expected to record a
substantial impairment of its investment in Crescent in Friedman's fiscal 2003
financial statements and that financial information for Crescent previously
included in Friedman's public filings should no longer be relied upon. While
neither the valuation of Friedman's investment in Crescent or the 2003
financial statements have been finalized and Friedman's is unable at this time
to make a precise estimate of the amount of such impairment, any recovery on
Friedman's investment is now highly dependent on the outcome of Crescent's
chapter 11 case including distributions made by Crescent to creditors and
equityholders as part of Crescent's reorganization case.
The Company also announced that Thaddeus S. Jaroszewicz has resigned as a
member of the Board of Directors. Chairman Allan Edwards said, "We thank Ted
for his service and contributions to the board during what has been a difficult
period for Friedman's."
About Friedman's
Founded in 1920, Friedman's Inc. is a leading specialty retailer based in
Savannah, Georgia. The Company is the leading operator of fine jewelry stores
located in power strip centers and regional malls. For more information, go
to: http://www.friedmans.com/ .
This release has been prepared by Friedman's. Farallon provided information
about its firm at http://www.faralloncapital.com/ .
Some of the statements included in this press release, particularly those
anticipating future financial performance, business prospects, growth and
operating strategies, the obtaining of additional financing and similar
matters, are forward-looking statements that involve a number of risks and
uncertainties. These forward-looking statements are not guarantees of future
performance and a variety of factors could cause the Company's actual results
to differ materially from the anticipated or expected results expressed in
these forward-looking statements. The Company undertakes no obligation to
update or revise any such forward-looking statements. The forward-looking
statements, the Company's liquidity, capital resources, ability to obtain
additional financing and results of operations are subject to a number of risks
and uncertainties, including but not limited to, the following: adverse
effects from the Company's delay in paying suppliers and from suppliers not
delivering merchandise; the ability of the Company to comply with the terms of
its credit facility; the ability of the Company to satisfy all conditions
precedent, including due diligence requirements, to any proposed additional
financing; the willingness of the Company's vendors to participate in a vendor
support program; potential adverse developments with respect to the Company's
liquidity and/or results of operations; competitive pressures from other
retailers; trends in the economy as a whole which may affect consumer
confidence and consumer demand for the types of goods sold by the Company; the
ability of the Company to attract, retain and compensate key executives and
associates; the ability of the Company to attract and retain customers;
potential adverse publicity; the ability of the Company to achieve the cost
savings and operational benefits projected from its planned store closings; the
final results of the audit including the review of the calculation of our
allowance for doubtful accounts and any recordation of impairment charges; the
results of the SEC and Justice Department investigations; the results of
various litigation; the effect of the restatement on our credit facilities,
including funding availability thereunder and our relationship with our
lenders; the effect of the restatement on our future earnings, including any
adjustments to previously announced earnings forecasts; and other risk factors
identified from time to time in our SEC reports, including, but not limited to,
the report on Form 10-K for the year ended September 28, 2002.
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DATASOURCE: Friedman's Inc.
CONTACT: Jane D'Arcy of Trion Communications, +1-401-453-3100, ext. 104,
, for Friedman's Inc.
Web site: http://www.friedmans.com/
http://www.faralloncapital.com/