Zale secures lifeline from Golden Gate Capital
Zale Corp. said Monday it has secured a $150 million lifeline from private equity firm Golden Gate Capital and a new $650 million credit line that will bolster the jeweler's cash position, allowing it to restructure its retail locations and expand online sales as it struggles with weak revenue amid the economy.
The five-year, senior secured term loan comes with a hefty annual interest rate of 15 percent. Golden Gate also will receive warrants to buy a 25 percent stake in the company, pending Zale shareholder approval. The deal to buy 11.1 million common shares at $2 each would make Golden Gate Zale's largest shareholder, compared with Breeden Capital's current holdings of about 9 million shares.
The firm also will name Express board chairman Stefan Kaluzny and Golden Gate executive Peter Morrow to Zale's board of directors -- replacing Thomas C. Shull and David M. Szymanski, who have resigned. In addition, Zale Chairman John B. Lowe, Jr., has said he won't run for reelection when his current board term expires at the company's next annual meeting.
