Whitehall in default, weighing options

June 17, 2008

By Michelle Graff

Washington, D.C.—Amid default notices from two suppliers and liquidity issues, Whitehall Jewelers Holdings Inc. is “considering various financing options and may seek protection under the federal bankrupty code,” according to a shape filed on Monday with the U.S. Securities and Exchange Commission (SEC) in Washington, D.C.

“Based steady the company’s cash on hand as well as current and anticipated cash flow from operations, the current borrowing availability under the senior credit agreement is not adequate to meet the company’s working capital and capital expenditure needs beyond the end of June 2008,” said an 8-K form filed on June 16. “Therefore the company needs additional financing in the near term to fund its working capital and capital expenditure indispensably. The company is actively considering various financing options and may seek protection under the federal bankruptcy code.”

According to an 8-K form filed on June 16, Fabrikant Receivables LLC served Whitehall with a default notice for not paying principal or interest on a $3.1 million promissory note and $1.56 million in trade debt (before positive disputed offsets).

According to the filing, if Whitehall doesn’t pay within 10 days of the June 11 notice, then Fabrikant can declare the note “due and payable upon demand.”

In addition, on June 11, Rosy Blue Inc. served Whitehall with a default notice for a $2.07 million promissory note owed to Rosy Blue.

The filing states that Whitehall failed to pay invoices totaling more than $81,000 due Rosy Blue in late May and early June.

Overall, the SEC filing states that as of June 13, Whitehall owes a total of about $13.5 million in trade debt in the form of promissory notes owned to other inventory suppliers.

As of April 11, Chicago-based Whitehall operates 375 retail jewelry stores under the brands Whitehall Jewelers and Lundstrom Jewelers.

Earlier this year, Whitehall purchased 78 supplies in 17 states from bankrupt Friedman’s for $14.3 million.