Freedom 100 Emerging Mar... (AMEX:FRDM)
Historical Stock Chart
From Aug 2019 to Aug 2024
![Click Here for more Freedom 100 Emerging Mar... Charts. Click Here for more Freedom 100 Emerging Mar... Charts.](/p.php?pid=staticchart&s=A%5EFRDM&p=8&t=15)
Friedman's, Inc. Files Chapter 11 to Pursue Financial
Restructuring
SAVANNAH, Ga., Jan. 15 /PRNewswire-FirstCall/ -- Friedman's Inc.
(OTC:FRDM.PK), the Value Leader in fine jewelry retailing, announced that
yesterday it filed voluntary petitions for reorganization under Chapter 11 on
behalf of the Company and nine of its subsidiaries to alleviate its short-term
liquidity issues, continue its ongoing restructuring initiatives and facilitate
the Company's turnaround. The Company said the filing should provide the
Company with the breathing room necessary to complete financial restructuring
initiatives the Company embarked upon more than five months ago. The Company
filed its petitions in Savannah, Georgia, where its executive headquarters are
located and where the first Friedman's store was opened in the 1920's when
Friedman's began as a small, family owned retailer called Friedman's Jewelers.
The filing was prompted by limitations imposed on funding this week by the
Company's lenders following the lenders' decision not to agree to amended
financial covenants in the Company's credit facility. As a result of the
funding limitations, Friedman's was unable to satisfy all of its cash
requirements in the ordinary course of business. The amendment had been
necessitated because delayed receipts of inventory shipments to the Company
during the 2004 holiday season and the implementation of more prudent credit
practices had a negative impact on its holiday season sales and contributed to
the Company not meeting December, 2004 minimum sales covenants in its credit
facility. Yesterday, the Collateral Trustee under the Company's Secured Trade
Credit Program with the Company's vendors delivered a notice of program default
to the Company after the lenders declined the written request of the informal
vendors committee to resume ordinary course funding of the Company. The program
default permits the Company's vendors to discontinue shipments to Friedman's
and retain their interests in a trade creditor lien earlier granted by the
Company to the vendors.
Chief Executive Officer Sam Cusano said, "By availing ourselves of the Chapter
11 process now, Friedman's expects that our vendors will resume shipping
inventory in anticipation of the upcoming Valentine's Day holiday."
Chapter 11 Financing
As a result of the timing of the filing necessitated by the funding limitations
imposed by the Company's lenders, the Company has not yet obtained a
debtor-in-possession (DIP) financing facility. However, the Company said that
it had received two DIP financing proposals this week and anticipated receiving
additional financing proposals over the holiday weekend. The Company said that
it is actively engaged in discussions with its existing and prospective
lenders, and is hopeful that a DIP financing agreement will be finalized and
presented to the Court for approval early next week. In the interim, the
Company will ask the Bankruptcy Court to authorize the Company to use cash
collateral which, upon Court approval, will enable Friedman's to utilize
existing cash and cash generated through normal business operations to fund
post-petition trade and employee obligations. The Company will seek the
approval of its existing lenders for interim use of cash collateral pending
finalization of a DIP financing agreement and expects to continue negotiations
with its lenders regarding the terms on which the lenders' interest will be
adequately protected during the proceedings.
Employee And Customer Obligations
The Company is seeking Court permission to honor all obligations to customers
including, return privileges, layaways, product protection plans, gift
certificates and other customer programs during the restructuring period.
"As the restructuring process progresses, neither Friedman's customers nor
employees of its 653 stores should notice any difference in the chain's
operations as a result of the filing. We expect to be able to provide our
customers with as good or better selection of merchandise and service as before
the filing. Daily operations will continue as usual, our stores will remain
open and transactions which occur in the ordinary course of business will
proceed as usual," Mr. Cusano stated.
"With the protection provided under the Bankruptcy Code for post-petition
purchases, the Company is confident that its suppliers will continue to support
it while the Company completes its restructuring," Mr. Cusano said.
Putting The Challenges of The Past Behind It
The Company noted that continued disappointing results, a high debt structure
resulting from its explosive growth beginning in the mid-1990's and continuing
over recent years, higher than anticipated default rates on the Company's
customized customer credit programs, and the cloud of uncertainty hanging over
the Company resulting from pending litigation and ongoing federal
investigations have limited its ability to secure alternate financing sources.
"Reorganization through the Chapter 11 process will allow the Company to
effectively put the challenges of the past behind it, and provide Friedman's
with a more appropriate capital structure and sufficient financial resources to
help secure our future, while addressing the litigation facing the Company.
Friedman's strong niche in the jewelry market and its well-deserved-reputation
for fine jewelry at market leading, value prices continue to provide tremendous
opportunity. Chapter 11 is a tool that will allow us to build upon our core
strengths so that we can emerge as a stronger, financially viable business,"
Mr. Cusano concluded.
While the Company requested that usual "first day" motions be heard early next
week, the Company sought and obtained immediate Court approval on three motions
to ensure that store operations and potential shoppers are not interrupted by
yesterday's filing. The interim orders entered by the Court provided that,
customer policies remain in full force including, exchanges, returns and
layaways; all outstanding payroll checks be honored; and the current cash
management system remain in place. The Company was extremely pleased that the
Bankruptcy Court was willing to approve these special motions on an interim
basis prior to the official "first day" hearing and looks forward to presenting
the remaining requests next week.
The Company filed its voluntary Chapter 11 petitions in the U.S. Bankruptcy
Court for the Southern District of Georgia, located in Savannah, where the
cases were assigned to the Honorable Lamar W. Davis. Judge Davis has scheduled
a hearing on the Company's first day motions to commence at 2:00 p.m. on
Tuesday, January 18, 2005.
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/.
Some of the statements included in this press release, particularly those
anticipating future financial performance, business prospects, growth and
operating strategies and similar matters, are forward-looking statements that
involve a number of risks and uncertainties. For those statements, we claim
the protection of the safe harbor for forward-looking statements contained in
the Private Securities Litigation Reform Act of 1995. 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, and results of operations are subject to a number of risks
and uncertainties, including but not limited to, the following: the ability of
the Company to operate as a going concern; the ability of the Company to obtain
use of cash collateral and/or debtor-in-possession (DIP) financing and to
operate pursuant to the terms of such agreements; court approval of the
Company's first day papers and other motions prosecuted by it from time to
time; the ability of the Company to develop, prosecute, confirm and consummate
one or more plans of reorganization with respect to the chapter 11 case; risks
associated with third parties seeking and obtaining court approval to terminate
or shorten the exclusivity period for the Company to propose and confirm one of
more plans of reorganization, for the appointment of a chapter 11 trustee or to
convert the cases to chapter 7 cases; the ability of the Company to obtain
trade credit, and shipments and terms with vendors and service providers for
current orders; the Company's ability to maintain contracts that are critical
to its operations; 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 final results of the audit including the
review of the calculation of our allowance for doubtful accounts; 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 risks 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.
DATASOURCE: Friedman's Inc.
CONTACT: Brenda Adrian or Maya Pogoda, both of Sitrick and Company,
+1-212-660-6391, both for Friedman's Inc.
Web site: http://www.friedmans.com/