UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): June 3, 2005 (May 27, 2005)
Friedman's Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-22356 58-20583
(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
171 Crossroads Parkway
Savannah, Georgia 31422
(Address of Principal Executive Offices)
(912) 233-9333
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
On May 27, 2005, Friedman's Inc. ("Friedman's" or the "Company"), a
debtor and debtor-in-possession under chapter 11 of title 11 of the United
States Code, and its wholly-owned subsidiaries, FI Stores Limited Partnership,
Friedman's Management Corp., Friedman's Florida Partnership, Friedman's Holding
Corp., FCJV Holding Corp., Friedman's Investments LLC and Friedman's
Beneficiary Inc., each a debtor and debtor-in-possession (collectively, the
"Subsidiary Guarantors"), entered into an Amended and Restated Secured
Super-Priority Debtor In Possession Credit Agreement (the "Amended and Restated
DIP Facility") with the lenders and issuers party thereto, and Citicorp USA
("CUSA") as Administrative Agent. The Amended and Restated DIP Facility amends
and restates, in its entirety, the Secured Super-Priority Debtor In Possession
Revolving Credit Agreement, dated as of January 31, 2005 (as amended by
Amendment No. 1 thereto, dated as of February 25, 2005, the "Original DIP
Facility"), with CUSA as Administrative Agent, and a syndicate of lenders, as
applicable, in order to provide for a subordinated term loan for $25.5 million
(the "Term Loan") as part of the facility, which Term Loan was purchased by the
Harbert Distressed Investment Master Fund (the "Harbert Distressed Fund") upon
closing.
Upon closing, the revolving portion of the Amended and Restated DIP
Facility was reduced to $99.5 million, so that the total notional amount of the
Amended and Restated DIP Facility continued to be $125 million. As of the
closing, upon funding of the Term Loan, Friedman's had an additional $12.5
million of revolver availability and will have an additional $12.5 million of
availability under its revolving facility upon Friedman's receipt of
commitments from its vendors sufficient to satisfy the Company's 2005 holiday
sales season merchandise requirements.
Availability under the revolving portion of the Amended and Restated
DIP Facility is subject to the satisfaction of a borrowing base, periodic
interest payments, payment of commitment fees and various other fees. The
Amended and Restated DIP Facility contains various covenants, including, among
other things, meeting certain financial tests and limitations with respect to
capital expenditures. In addition, under the Amended and Restated DIP Facility,
the Company is required to provide certified annual and monthly consolidated
financial statements, certified periodic collateral reports, annual business
plans, weekly statements of cash flows and weekly borrowing base
determinations.
The Company is also subject to customary covenants regarding the
incurrence of additional indebtedness and liens, permitted investments, the
sale and disposition of assets, affiliate transactions and the incurrence of
certain claims and expenses. Under the Amended and Restated DIP Facility, the
Company and its subsidiaries are subject to customary defaults, including,
among other things, payment defaults, the failure to meet financial tests,
material inaccuracies of representations and warranties, breach of covenants,
and cross-defaults to other post-petition indebtedness. The Amended and
Restated DIP Facility also contains other default provisions typically
contained in debtor-in-possession financing facilities. The Company and the
Subsidiary Guarantors each guarantee the loans and obligations under the
Amended and Restated DIP Facility, and secure such guarantees and obligations
with a security interest in the property and assets of the Company and the
Subsidiary Guarantors.
The Term Loan may be repaid or converted into new common equity of the
Company upon the consummation of a plan of reorganization of the Company and
the prior repayment of all outstanding revolving loans under the Amended and
Restated DIP Facility. If the Harbert Distressed Fund is the plan investor in
the Company's plan of reorganization, the Term Loan will be converted into new
common equity of the Company following its emergence from chapter 11 at a
conversion price which is equivalent to a 10% discount to the equity value of
the Company upon emergence. If the Harbert Distressed Fund is not the plan
investor, at the election of the Harbert Distressed Fund, the Term Loan and a
related termination fee may be repaid in cash, or the Term Loan may be
converted into new common equity of the Company at a conversion price which is
the lesser of the equivalent of a 20% discount to the equity value of the
Company upon emergence from chapter 11, or the price which is sufficient to
convert the term loan into 25% of the new common equity upon emergence from
chapter 11.
The foregoing descriptions are qualified in their entirety by
reference to the Amended and Restated DIP Facility, a copy of which is included
with this Current Report on Form 8-K as Exhibit 10.1.
Item 7.01 Regulation FD Disclosure.
As previously reported, on January 14, 2005, Friedman's and certain of
its subsidiaries (collectively, the "Debtors") filed voluntary petitions for
relief under chapter 11 of title 11 of the United States Code (the "Bankruptcy
Code") in the United States Bankruptcy Court for the Southern District of
Georgia, located in Savannah (the "Bankruptcy Court") (Case No. 05-40129). On
May 27, 2005, the Company filed with the Bankruptcy Court its monthly
consolidated operating report, as required by the Bankruptcy Code, for the
period April 2, 2005 through April 30, 2005 (the "Operating Report"), the text
of which is included as Exhibit 99.1 to this Current Report on Form 8-K.
Cautionary Statement Regarding Financial and Operating Data
-----------------------------------------------------------
The Company cautions investors and potential investors not to place
undue reliance on the information contained in the Operating Report. The
Operating Report contains financial information that has not been audited or
reviewed by independent accountants and may be subject to future reconciliation
and adjustments. The Operating Report is in a format agreed to between the
Debtors and the Office of the United States Trustee and should not be used for
investment purposes. The Operating Report contains information for periods
different from those required in the Company's reports pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act"), and that information
might not be indicative of the Company's financial condition or operating
results for the period that would be reflected in the Company's financial
statements or in its reports pursuant to the Exchange Act. Results set forth in
the Operating Report should not be viewed as indicative of future results.
Cautionary Statement Regarding Forward-Looking Statements
---------------------------------------------------------
Some of the statements included in this Current Report on Form 8-K and in the
Operating Report, particularly those anticipating future financial performance,
business prospects, growth and operating strategies and similar matters, are
forward-looking statements that involve a number of risks and uncertainties.
For those statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are not guarantees of
future performance and a variety of factors could cause the Company's actual
results to differ materially from the anticipated or expected results expressed
in these forward-looking statements. The Company undertakes no obligation to
update or revise any such forward-looking statements. The forward-looking
statements and the Company's liquidity, capital resources, and results of
operations are subject to a number of risks and uncertainties, including, but
not limited to, the following: the ability of the Company to operate as a going
concern; the ability of the Company to continue to obtain use of cash
collateral and/or debtor-in-possession (DIP) financing pursuant to the terms of
such agreements; the ability of the Company to comply with the terms and
conditions of its DIP financing, including its secured subordinated term loan
with Harbert Distressed Investment Master Fund, Ltd.; court approval of the
motions prosecuted by the Company from time to time; the ability of the Company
to develop, prosecute, confirm and consummate one or more plans of
reorganization with respect to the chapter 11 case; risks associated with third
parties seeking and obtaining court approval to terminate or shorten the
exclusivity period for the Company to propose and confirm one or more plans of
reorganization, for the appointment of a chapter 11 trustee or to convert the
cases to chapter 7 cases; the ability of the Company to obtain trade credit,
and shipments and terms with vendors and service providers for current orders;
the Company's ability to maintain contracts that are critical to its
operations; potential adverse developments with respect to the Company's
liquidity and/or results of operations; competitive pressures from other
retailers; trends in the economy as a whole which may affect consumer
confidence and consumer demand for the types of goods sold by the Company; the
ability of the Company to attract, retain and compensate key executives and
associates; the ability of the Company to attract and retain customers;
potential adverse publicity; the final results of the audit including the
review of the calculation of our allowance for doubtful accounts; the results
of the SEC and United States Attorney's Office for the Eastern District of New
York investigations; the results of various litigation; the effect of the
restatement on our credit facilities, including funding availability thereunder
and our relationship with our lenders; the effect of the restatement on our
future earnings, including any adjustments to previously announced earnings
forecasts; and other risks factors identified from time to time in our SEC
reports, including, but not limited to, the report on Form 10-K for the year
ended September 28, 2002.
Similarly, these and other factors, including the terms of any
reorganization plan ultimately confirmed, can affect the value of our various
prepetition liabilities, common stock and/or other equity securities. No
assurance can be given as to what values, if any, will be ascribed in the
bankruptcy proceedings to each of these constituencies. A plan of
reorganization could result in holders of the Company's common stock receiving
no distribution on account of their interest and cancellation of their
interests. As described in the Company's public statements in response to the
request submitted to the United States Trustee for the appointment of a
statutory equity committee, holders of the Company's common stock (both Series
A and Series B common stock) and other equity interests (such as options and
warrants) should assume that they could receive little or no value as part of a
plan of reorganization. In addition, under certain conditions specified under
the Bankruptcy Code, a plan of reorganization may be confirmed notwithstanding
its rejection by an impaired class of creditors or equity holders and
notwithstanding the fact that equity holders do not receive or retain property
on account of their equity interests under the plan. In light of the foregoing,
the Company considers the value of the common stock to be highly speculative
and cautions equity holders that the stock may ultimately be determined to have
no value. Accordingly, the Company urges that appropriate caution be exercised
with respect to existing and future investments in the Company's common stock
or any claims relating to prepetition liabilities and/or other interests in the
Company such as warrants convertible into equity interests.
Item 8.01. Other Events.
On May 31, 2005, Friedman's issued a press release which announced
that the Company had successfully closed the Amended and Restated DIP Facility.
The press release also announced that the Bankruptcy Court entered orders in
connection with the following matters at the Company's monthly omnibus hearing
on May 26, 2005:
o An order authorizing the Company to consent to the Harbert Distressed
Fund's entry into various participation agreements with certain of
Friedman's vendors in connection with such vendors' claims under
Friedman's prepetition secured trade credit program. As previously
announced by the Company, its consent to the assignment of such claims
is conditioned upon the occurrence of an effective date of a plan of
reorganization in the Company's chapter 11 case and a particular
vendor's compliance with certain trade terms, including obligations to
fulfill the Company's 2005 holiday orders.
o An order suspending all discovery and proceedings on the court's trial
calendar with respect to litigation between Friedman's and Jewelry
Investors II, L.L.C., the term lender under the Company's prepetition
senior secured credit facility, pending the Bankruptcy Court's
consideration of a definitive settlement agreement between the Company
and Jewelry Investors. The litigation relates to certain disputed
claims by Jewelry Investors against the Company in connection with the
Company's February 25, 2005 repayment of the term loan portion of its
prepetition senior secured credit facility. Jewelry Investors had
alleged damages of at least $13.1 million plus unspecified contingent
claims, all of which have been settled for a $1.9 million allowed
secured claim by the Harbert Distressed Fund (which will purchase
certain of Jewelry Investors' claims in connection with the
settlement) and various releases. In addition, an escrow in the amount
of $300,000 established earlier in the chapter 11 cases for Jewelry
Investors' benefit will be returned to Friedman's. The settlement,
which has been approved by the Company's Board of Directors and
Friedman's Official Committee of Unsecured Creditors, remains subject
to approval of the Bankruptcy Court, which is scheduled to consider
the merits of the settlement at the June 30, 2005 omnibus hearing.
The text of the press release is included as Exhibit 99.2
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit
Number Description
------ -----------
Exhibit 10.1 Amended and Restated Secured Super-Priority Debtor In
Possession Credit Agreement, dated as of May 27, 2005, by
and among Friedman's Inc., and certain of its
subsidiaries party thereto, and the lenders and issuers
party thereto, and Citicorp USA, Inc., as Administrative
Agent
Exhibit 99.1 Monthly Operating Statements for the period April 2, 2005
through April 30, 2005
Exhibit 99.2 Press Release dated May 31, 2005
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FRIEDMAN'S INC.
Date: June 3, 2005 By: /s/ C. Steven Moore
---------------------------------
C. Steven Moore
Chief Administrative Officer
and General Counsel
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
Exhibit 10.1 Amended and Restated Secured Super-Priority Debtor In
Possession Credit Agreement, dated as of May 27, 2005, by
and among Friedman's Inc., and certain of its
subsidiaries party thereto, and the lenders and issuers
party thereto, and Citicorp USA, Inc., as Administrative
Agent
Exhibit 99.1 Monthly Operating Statements for the period April 2, 2005
through April 30, 2005
Exhibit 99.2 Press Release dated May 31, 2005