Zale Rises on Buyback, New Credit Plan - TheStreet

Zale Rises on Buyback, New Credit Plan

Shares of the jewelry retailer increased 15% on the news.
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Shares of jewelry retailer

Zale

(ZLC)

spiked 15% in Tuesday trading after the company announced it began a modified Dutch auction tender offer to buy back up to 6.4 million shares, or about 20% of its stock outstanding, in a deal that could total up to $307.2 million.

Additionally, the Dallas-based company said it plans to sign a new $500 million secured revolving credit facility. Shares of Zale closed higher by $5.90, at $45.90, on the news.

The company said it will repurchase the shares at no less than $42 a share and no more than $48 a share. The tender offer will expire at midnight EST on July 29, unless it's extended.

Zale also said that, in conjunction with the stock offer, it will arrange a revolving credit plan with a lending syndicate to replace its existing $225 million unsecured facility. The company expects the new facility to be secured mostly by inventory.

Additionally, the company issued a call for the remaining $87 million of its 8.5% senior notes due 2007. Zale plans to use about $140 million of its existing cash to fund the call of the senior notes and a portion of the tender offer.