Zale Corp., the third-largest U.S. jeweler, received a $150 million loan from Golden Gate Capital Corp., which in return gets warrants to purchase 25 percent of Zale stock and two representatives elected to its board.
The company also struck new agreements for a $530 million credit facility through April 2014, led by Bank of America Corp., and for a store-brand Canadian credit card financed by a unit of Toronto-Dominion Bank, Zale said in a statement today. Golden Gate’s financing is a five-year senior secured term loan.
Zale, based in Irving, Texas, sought capital earlier this year after a slump in consumer spending contributed to seven straight quarters of losses. Stefan Kaluzny and Peter Morrow from Golden Gate will serve on Zale’s board, replacing Thomas C. Shull and David M. Szymanski. Board chairman John B. Lowe Jr. won’t run for reelection when his term expires later this year, the company said.
“They’ve got a fabulous track record of excellence in retail,” Zale’s Chief Financial Officer Matt Appel said of Golden Gate in a telephone interview today. The San Francisco- based firm can help with logistics, real estate and online sales, he said.
The stock rose 27 cents, or 9.9 percent, to $3 at 4:15 p.m. in New York Stock Exchange composite trading before the announcement. The shares have gained 10 percent this year.
Zale’s revenue fell 17 percent in 2009 to $1.78 billion. The company reported its first quarterly profit in two years in February, helped by a tax benefit and a smaller sales decline. In January, it replaced its chief executive officer as well as its heads of stores and merchandising.
Finlay Enterprises Inc., a New York-based jewelry retailer founded in 1887, filed for bankruptcy last August. Fortunoff Holdings LLC filed for bankruptcy in February 2009.