Updated from 4:17 p.m. EDT
The financing for
purchase of struggling rival
may be in jeopardy.
UBS Loan Finance, which had agreed to finance the $1.5 billion acquisition of Genesco, said in a letter that it is "extremely concerned" about Genesco's apparent deteriorating financial position. Finish Line disclosed excerpts from the letter in a press release Friday.
Our agreement to perform
the financing under the Commitment Letter may be terminated if a Material Adverse Effect has occurred with respect to Genesco," the UBS letter, dated Sept. 13, said. "As of today, we are not yet satisfied that Genesco has not experienced a Material Adverse Effect."
The lender said it will continue to work with Finish Line, but it wants access to Genesco's books to assess the company's finances.
Genesco, in its own press release, said that no material adverse effect has occured under the deal.
Finish Line, which agreed in June to acquire Genesco for $54.50 a share, said late last month that it was mulling its options with regard to the deal. That shift came after Genesco reported a surprise $4.2 million loss for the second quarter.
Genesco shareholders are scheduled to vote on the transaction Monday.
Shares of Finish Line jumped 43 cents, or 8.7%, to $5.37 Friday. Many investors have been rooting against the purchase of the larger, struggling Genesco because it may damage Finish Line's bottom line. Shares of Genesco slid $1.29, or 2.8%, to $44.53.