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Whitehall to Liquidate

Inventory of $1.2 billion available as chain winds down.

Whitehall Jewelers is in full liquidation mode with sales beginning today.

A joint venture of national retail liquidation and asset recovery firms — Hudson Capital Partners, Great American Group, Silverman Jeweler Consultants and Gordon Brothers Group — will manage the court-ordered bankruptcy liquidation sales.

Whitehall filed a voluntary Chapter 11 petition in June for reorganization in a Delaware bankruptcy court after acquiring Friedman’s Inc., a bankrupt jewelry chain, for $14.3 million in April. The acquisition, which included certain assets of Crescent Jewelers, previously acquired by Whitehall, added about 78 units to the debtor’s store count.

By May, Chicago-based Whitehall operated 375 stores in 39 states. But the acquisition of Friedman’s in the hope of expanding the business came too late. In fiscal 2007, Whitehall posted a net loss of $74.1 million, or $2.25 a share, outpacing the loss of $45.9 million, or $1.81, in the previous year. Sales declined 8.8 percent to $242.9 million from $266.2 million in fiscal 2006.

It is expected that the Whitehall inventory will be liquidated at below-market prices. The sale, which could last four-and-a-half months, will include diamonds, gold, precious and semiprecious jewelry and watches.

“We’re the biggest jewelry retailer right now in the U.S.,” said James L. Schaye, president and chief executive officer of Hudson Capital Partners. “We’re selling about $1.2 billion worth of inventory that is from both Whitehall and Friedman’s.”

Schaye noted that a combination of consumer cutbacks on peripheral spending, tighter terms among retail lenders and a change in the bankruptcy code have led firms such as his to experience the “most active period of liquidation sales in 10 years.”

Along with Great American Group and Silverman Jeweler Consultants, Schaye’s firm also managed the liquidation of Friedman’s Jewelers.

“Whitehall has been a leading specialty retailer in fine jewelry for more than a century,” said Harvey Yellen, chairman of Great American Group. “It is unfortunate that a brand with such strong heritage has to be liquidated.”

Whitehall negotiated an $80 million debtor-in-possession financing facility from Bank of America, Wells Fargo Retail Finance and GMAC Commercial Finance. The DIP facility replaced the $125 million revolving credit facility it had before its Chapter 11 filing. That line was enough to keep the jewelry retailer in operation until its liquidation.

Whitehall listed assets of $207.1 million and debts of $185.4 million. Among the top trade creditors are: SDC, or Sangam Diamonds Corp., New York, $11.3 million; Kiran Jewels Inc., New York, $9.4 million; Combine International, Troy, Mich., $7.1 million; Rosy Blue, New York, $6.9 million; Envisions, New York, $4.5 million, and Leo Schachter Diamonds, New York, $4.1 million.