Hanover Direct Announces the Closing and Funding of a New Loan Facility and an Amendment of Its Existing Credit Facility Increas

Hanover Direct Announces the Closing and Funding of a New Loan
Facility and an Amendment of Its Existing Credit Facility Increasing Liquidity
by Approximately $25 Million 


EDGEWATER, N.J., July 12  /PRNewswire-FirstCall/ -- Hanover Direct, Inc.
(AMEX:HNV) today announced that it has closed and funded a $20 million junior
secured term loan facility with Chelsey Finance, LLC, an affiliate of its
controlling shareholder, Chelsey Direct LLC.  The Term Loan Facility is for a
three-year term, subject to earlier maturity upon the occurrence of a change in
control or sale of the Company, and carries an interest rate of 5% above the
prime rate publicly announced by Wachovia Bank, N.A., payable currently. The
Term Loan Facility is secured by a second priority lien on the assets of the
Company.  In connection therewith, Chelsey Finance concurrently entered into an
intercreditor and subordination agreement with the Company's senior secured
lender, Congress Financial Corporation.

In consideration for providing the Term Loan Facility to the Company, Chelsey
Finance received a closing fee, which was paid in cash, and will receive a
warrant to purchase 30% of the fully diluted shares of common stock of the
Company.  Pending shareholder approval of such issuance, Chelsey Finance
received a warrant to purchase a newly-issued series of nonvoting preferred
stock of the Company that will be automatically exchanged for such common stock
warrant upon the receipt of shareholder approval of the issuance thereof, which
is anticipated at the Company's 2004 Annual Meeting of Shareholders scheduled
for August 12, 2004.  In connection with the closing of the Term Loan Facility,
Chelsey Direct received a waiver fee  payable in common stock of the Company in
consideration for the waiver by Chelsey Direct of its blockage rights over the
issuance of senior securities.

The terms of the Term Loan Facility with Chelsey Finance were approved by the
Company's Audit Committee, all of whose members are independent, and the
Company's Board of Directors.

Concurrently with the closing of the Term Loan Facility with Chelsey Finance,
the Company amended its existing senior credit facility with Congress to (1)
release certain existing availability reserves and remove the excess loan
availability covenant, increasing availability to the Company by approximately
$10 million, (2) reduce the amount of the maximum credit, the revolving loan
limit and the inventory and accounts sublimits of the borrowers, (3) defer for
three months the payment of principal with respect to the Tranche A Term Loan,
(4) modify certain provisions of the Congress Credit Facility with respect to
asset sales and the application of proceeds thereof by borrowers, (5) extend
the term of the Congress Credit Facility until July 8, 2007, and (6) permit the
secured indebtedness to Chelsey Finance arising under the Term Loan Facility
and other related transactions in connection with the Term Loan Facility.  The
amendment required the payment of fees to Congress.

Together, these two arrangements have increased the Company's liquidity by
approximately $25 million.  Proceeds from the Term Loan Facility with Chelsey
Finance have been used to repay the Tranche B Term Loan of approximately $4.9
million under the Congress Credit Facility and to pay fees and expenses in
connection with the two transactions and will provide ongoing working capital
for the Company.

About Hanover Direct, Inc.

Hanover Direct, Inc. (AMEX:HNV) and its business units provide quality, branded
merchandise through a portfolio of catalogs and e-commerce platforms to
consumers, as well as a comprehensive range of Internet, e-commerce, and
fulfillment services to businesses. The Company's catalog and Internet
portfolio of home fashions, apparel and gift brands include Domestications, The
Company Store, Company Kids, Silhouettes, International Male, Scandia Down, and
Gump's By Mail. The Company owns Gump's, a retail store based in San Francisco.
Each brand can be accessed on the Internet individually by name. Keystone
Internet Services, LLC (http://www.keystoneinternet.com/), the Company's third
party fulfillment operation, also provides the logistical, IT and fulfillment
needs of the Company's catalogs and web sites.  Information on Hanover Direct,
including each of its subsidiaries, can be accessed on the Internet at
http://www.hanoverdirect.com/. 

DATASOURCE: Hanover Direct, Inc.



CONTACT:  Charles Blue, S.V.P. & Chief Financial Officer of Hanover

Direct, Inc., [phone]; Rich Tauberman of MWW Group, [phone],

for Hanover Direct, Inc.



Web site:  http://www.hanoverdirect.com/

http://www.keystoneinternet.com/ 

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