By  on December 18, 2008

Jewelry retailer Finlay Enterprises Inc. said in a regulatory filing with the Securities and Exchange Commission that its lenders are performing another review, which could further impact the firm’s borrowing capacity.

If the company can’t improve its liquidity, Finlay said it might have to “significantly curtail our operations or pursue other available options.”

Although the refinancing of long-term debt this month and in November provided some relief, the retailer noted there was no assurance that its business operations, working capital and borrowing availability through the end of the year will be “sufficient to meet” current estimates of its needs or allow it to maintain compliance with a $30 million minimum unused balance requirement.

Hurt by the banking and credit crises, and facing the closure of its leased departments at several department stores, the retailer said current conditions have “negatively impacted our liquidity position and operating performance, and our sales are significantly below our original projections.”

Finlay also said in its filing on third-quarter earnings that senior secured lenders had decreased the borrowing availability under its revolving credit agreement after conducting its latest periodic inventory appraisal. Its third-quarter net loss grew to $20.8 million. Sales rose 12.9 percent to $141.9 million, due in part to the November 2007 acquisition of Bailey Banks & Biddle from Zale Corp., but fell 14.9 percent on a same-store basis.

On Jan. 31, Finlay will close 93 licensed departments in Macy’s North and Northwest divisions which generated $120 million in 2007 revenue. The firm will continue to operate 216 counters for Macy’s Central, as well as areas in 34 stores in Macy’s Bloomingdale’s division. The Macy’s Central licenses expire on Jan. 29, 2011, and the Bloomingdale’s license one year earlier. Licensed departments in Macy’s stores accounted for 52 percent of Finlay sales, or $438.6 million, in 2007.

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