Whitehall Files for Chapter 11 Protection

Updated, 6/24, 5:06 a.m.: Jeweler is likely to liquidate

-- JCK-Jewelers Circular Keystone, 6/23/2008 2:06:00 PM

Whitehall Jewelers Holdings, Inc., said Monday that it and its operating subsidiary, Whitehall Jewelers, Inc., have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The filings were made Monday in the U.S. Bankruptcy Court for the District of Delaware. Whitehall said in a statement that it plans to continue to conduct business as usual while it develops a reorganization plan.

To fund its continuing operations during the reorganization process, the Chicago-based jewelry retailer said it negotiated an $80 million debtor-in-possession financing from Bank of America, N.A., Wells Fargo Retail Finance, LLC, and GMAC Commercial Finance, LLC.

This DIP credit facility would replace the company's previous $125 million revolving credit facility. Subject to court approval, Whitehall said it will use the DIP credit facility to fund its working capital requirements, including employee wages and benefits, certain supplier payments and other operating expenses during the reorganization process.

The Chicago Tribune reports that the terms of Whitehall’s loan require it to win bankruptcy court approval of a deal to sell its assets by July 18.

The company is asking the bankruptcy court for permission to hold an auction on July 16, where it will consider "all alternatives regarding a disposition of substantially all of the assets," the newspaper reports. Whitehall said such options include selling all or a portion of its business as a going concern or selling the rights to liquidate its inventory.

Whitehall said while it hasn't lined up a lead bidder to make an offer, it does have a leading bid from a group of liquidators that comrpise of Great American Group LLC, Hudson Capital Partners LLC, and Silverman Jeweler Consultants Inc., the newspaper reports. The joint venture is seeking the right to conduct store closing sales at Whitehall's stores. The liquidators' bid would guarantee a payment to Whitehall that's equal to 90 percent of the value of the inventory they sell.

Whitehall Jewelers is a national specialty retailer of fine jewelry offering a selection of merchandise in the following categories: diamonds, gold, precious and semi-precious jewelry and watches. It operated approximately 373 stores in regional and super-regional malls in 39 states.