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Whitehall lenders apply inventory reserve, new financing needed to meet working capital needs
By Sara Rosenberg
New York, Dec. 31 - Whitehall Jewelers Holdings Inc. has been informed by the administrative agent on its credit facility that a $10 million inventory reserve is being implemented on Dec. 27, and with this reserve, the company warned that it will not be able to meet its working capital needs unless new financing is obtained, according to an 8-K filed with the Securities and Exchange Commission.
Upon being implemented, the reserve will result in a corresponding reduction in liquidity of $10 million under the company's revolver.
Taking the new reserve, outstanding borrowings and letters of credit into account, the company's borrowing availability will be about $28 million.
The company said in the filing that based on recent financial results and the inventory reserve, the borrowing availability under the revolver, together with cash on hand, current and anticipated cash flow from operations, and cost reductions, is not adequate to meet working capital and capital expenditure needs through the remainder of fiscal 2007 or thereafter.
To that end, Prentice has expressed its intent to provide a $25 million secured loan to the company, subject to certain conditions.
If the company is unable to obtain this secured loan or any similar financing, it will not be able to pay all of its obligations as they come due in fiscal 2007 or thereafter, and, if extended, the $25 million principal amount of this secured loan may not be sufficient to enable the company to pay all of its obligations as they come due in fiscal 2007 or thereafter.
Whitehall is a Chicago-based jewelry retailer.
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