Whitehall Jewellers gets tender, debt refinancing offers from Newcastle Partners

By Caroline Salls

Pittsburgh, Jan. 23 - Whitehall Jewellers, Inc. received a proposal Friday from Newcastle Partners, LP to carry out its $1.50 per share tender offer and to refinance Whitehall's debt, including $140 million in term loans and $147.5 million cash to cover the tender offer and loans, according to a news release.

Highlights of the proposal include:

• Newcastle's intention to pay all Whitehall stockholders $1.50 for each share of Whitehall stock tendered to it on or before the expiration date, which would be extended to mid-February under Newcastle's most recent offer;

• Newcastle's agreement to provide Whitehall with $140 million in term loans, including a $50 million term loan, of which $30 million would be used to pay off Whitehall's Prentice Capital Management, LP bridge loan and $20 million of which would be used for fees and working capital, a $75 million term loan to be used to repay in full Whitehall's senior credit facility with LaSalle Bank, NA and a $15 million term loan for additional working capital;

• Newcastle's commitment to place $147.5 million in cash in a bank account to ensure that there is enough money to fund the tender offer and the term loans;

• Upon acceptance of the merger agreement by Whitehall and Newcastle's funding of the $50 million term loan, Newcastle will receive a warrant to purchase 19.99% of Whitehall's stock. This warrant would be on the same terms as the Prentice warrant, except the Newcastle exercise price would be $1.50 per share, instead of $0.75 per share.

Newcastle said in the release that it believes that the transaction is far superior to a Prentice refinancing transaction that was recommended by Whitehall's board of directors.

Newcastle said it is prepared to proceed immediately with this transaction, which will provide liquidity to Whitehall and a superior return to stockholders.

"I believe that our proposed transaction is not only superior for stockholders, but that it also addresses the important financial needs of Whitehall's other constituencies," Newcastle managing member Mark Schwarz said in the release.

Whitehall is a Chicago-based jewelry retailer.

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