Zale Announces Significant Improvements To Capital Structure; Expected Annual Savings Of $17 Million

Zale Corporation (NYSE: ZLC) today announced that it has secured a new $665 million credit facility, which includes an amended and extended $650 million Revolving Credit Facility and a new $15 million First-In, Last-Out (FILO) Credit Facility. The company also announced that it utilized increased availability from these facilities to fund a prepayment of $60.5 million on its Senior Secured Term Loan. In addition, Zale amended and extended its Senior Secured Term Loan with Golden Gate Capital for the remaining $80 million.

Overview of the Amended and Extended Revolving Credit Facility

• Facility size of $650 million
• Matures in five years, an increase of about three years from the prior agreement
• Priced at LIBOR plus 175 to 225 basis points based on the company’s average availability, an improvement of 175 basis points from the prior agreement
• Enhanced borrowing capacity by increasing the inventory collateral base by 2.5 percent to 90 percent

Overview of New FILO Credit Facility

• Facility size of $15 million
• Matures in five years
• Priced at LIBOR plus 350 to 400 basis points based on the company’s average availability
• Further enhanced borrowing capacity by increasing inventory collateral base up to an additional 2.5 percent

Overview of Amended and Extended Senior Secured Term Loan

• Utilized increased availability from the $665 million credit facility to fund a prepayment of $60.5 million on the term loan
• Amended and extended the Senior Secured Term Loan agreement for remaining $80 million
• Matures in five years, an increase of about two years from prior agreement
• Fixed interest of 11 percent per annum, payable quarterly in cash, a reduction from 15 percent per annum in the prior agreement
• Eliminated store contribution covenants and improved minimum liquidity requirement yielding approximately $50 million of additional availability
• Non-callable in year one, optional redemption with call premium of 4 percent in year two, 3 percent in year three and 2 percent in year four

The new $665 million credit facility was led by Bank of America, administrative agent, and Wells Fargo Bank and J.P. Morgan Securities, co-syndication agents. Peter J. Solomon Company acted as financial advisor for the company.

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