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Finlay Reports Higher 3Q Loss

Finlay stock falls as Moody's downgrades rating.

Jewelry retailer Finlay Enterprises Inc. reported a higher third-quarter loss on Thursday, partly because of the acquisition of Bailey Banks & Biddle. Concerns about the firm’s finances pushed down the share price.

For the three months ended Nov. 1, the loss grew to $20.8 million, or $2.23 a share, from $7.5 million, or 82 cents, in the year-ago quarter. Results from the prior year exclude continuing operations figures from Parisian stores, which were acquired by Belk Inc. In addition, the company expected an interim loss from its acquisition of Bailey Banks & Biddle from Zale Corp. in November 2007.

Sales grew 12.9 percent to $160.3 million from $141.9 million. Comparable-store sales fell 14.9 percent, and by 13.5 percent excluding the Macy’s and Lord & Taylor leased stores that are scheduled to close at yearend.

During a conference call, Bruce Zurlnick, chief financial officer, said the debt-restructuring transaction that closed on Nov. 26 “enhances” the firm’s liquidity and increases its availability under its revolving credit facility. The firm received $20 million from the transaction, and certain shareholders now own new second lien secured notes that do not require interest payments for two years.

Moody’s Investors Service, however, viewed the restructuring as a “distressed exchange” and downgraded the company’s rating to signify that a default had occurred on its rated securities.

Finlay shares ended the day at 5 cents, down 7 cents, or 58.3 percent, versus the 52-week high of $3.05 reached last Dec. 12.

Standard & Poor’s lowered its credit rating for Finlay to “selective default” on Wednesday.

For the nine months, the loss was $44.1 million, or $4.75 a share, from $23.5 million, or $2.58, a year ago. Sales rose 22.8 percent to $556 million from $452.8 million.