Settlement expected in solvency trial involving Genesco, Finish Line and UBS

By Lisa Kerner

Charlotte, N.C., March 3 - Genesco Inc. and the Finish Line, Inc. requested a one-day delay in the start of the New York solvency trial filed by UBS Loan Finance LLC and UBS Securities LLC in anticipation of a settlement.

The settlement would be of all litigation among the Finish Line, Genesco and UBS.

Terms of the settlement are expected to be as follows:

• The merger agreement between Genesco and Finish Line will be terminated;

• The financing commitment from UBS to Finish Line will be terminated; and

• UBS and Finish Line will pay Genesco $175 million in cash along with a number of class A shares of Finish Line common stock equal to 12% of the total post-issuance Finish Line outstanding shares.

The Finish Line expects to pay its portion of the cash settlement from cash reserves, according to a company news release.

Genesco and the Finish Line are also expected to enter into a mutual standstill agreement.

QVT Financial LP, Genesco's largest shareholder, "strenuously" opposed the proposed settlement and asked the company's board to reject it.

The settlement is not in the best interests of Genesco's shareholders, QVT said in a statement released on Monday.

QVT seeks to meet with Genesco's board and management to further discuss the matter.

It was previously reported that the Chancery Court for the State of Tennessee ruled that the Finish Line breached its merger agreement with Genesco Inc.

The court declared that "all conditions to the merger agreement have been met" and the Finish Line is not entitled to invoke the termination procedures of the agreement, according to a Genesco news release.

Finish Line had said that the round of lawsuits and investigations surrounding its proposed merger with Genesco qualified as a material adverse effect and would cause a condition to the transaction to fail.

On Sept. 17, Genesco shareholders approved the June 18, 2007 merger agreement that would give them $54.50 in cash, without interest, for each share of Genesco common stock they own. The transaction, valued at an estimated $1.5 billion, was slated to close in the fall.

A form 8-K filing with the Securities and Exchange Commission reported that UBS believed the Finish Line would not be able to provide, prior to April 30, a valid solvency certificate, which is a condition of the closing.

UBS had extended the termination date of the commitment letter to April 30 from Dec. 31.

Both Genesco and the Finish Line are specialty retailers. Genesco is based in Nashville, while the Finish Line is based in Indianapolis.

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