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Whitehall Gets Financing

CHICAGO-After a year of financial and personnel struggles, the jewelry retailer enters into a financial agreement with Prentice Capital.

By Dana Dubriwny | Updated on October 04, 2005

CHICAGO-Following perpetual struggles since last year’s securities fraud investigations, cash-depleted Whitehall Jewellers Inc. is finally seeing a bit of good fortune. New York City-based Prentice Capital Management LP has come to the retailer’s aid with a $30-million bridge loan, allowing the company to pay off outstanding debt and purchase new inventory for the holiday season.

But there’s a catch. In return for the bridge loan, Whitehall has agreed to sell 2.8 million shares or about 20% of the company at an exercise price of 75 cents per share. The company also agreed to issue $50 million in notes that the investors can convert into common stock at the same per-share price. After converting the notes, receiving interest in shares and exercising the warrants, Whitehall says Prentice would own about 87% of its common stock.

The issuance of the convertible notes is subject to a number of conditions including shareholder approval of a 1-for-2 reverse stock split. Additionally, Prentice Capital plans to elect enough of its own to constitute a majority on the company’s board of directors.

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