Finlay buys 98% of 8 3/8% notes, 79% of 9% debentures in tender, calls remainder

New York, June 3 - Finlay Enterprises Inc. said its wholly owned subsidiary Finlay Fine Jewelry Corp. purchased 98% of the $150 million principal amount of its 8 3/8% senior notes due 2008 while Finlay Enterprises bought 79% of the $75 million principal amount of its 9% senior debentures due 2008 under the tender offer for the securities. The companies also made consent payments.

Funding came from Finlay Fine Jewelry's recent sale of $200 million 8 3/8% senior unsecured notes due 2012 and borrowings under its revolving credit facility.

The supplemental indentures to the notes became effective Thursday with the purchase of the notes under the tender offer.

Finlay Fine Jewelry and Finlay Enterprises also said they will redeem on July 2 any notes and debentures that remain outstanding at prices of 102.792% and 103.000% of par, respectively, plus accrued interest to the redemption date.

Remaining proceeds from the bond sale and revolving credit facility borrowings will be used to finance the redemptions.

Finlay said on May 20 it received the required consents to proposed indenture changes from holders of its 9% debentures and that its Finlay Fine Jewelry subsidiary had received the required consents from holders of its 8 3/8% notes.

Finlay said that as of the now-expired May 19 consent deadline, holders of about 79% of the 9% debentures and 98% of the 8 3/8% notes had tendered their debentures or notes and had delivered consents.

The tender offers are scheduled to expire on June 4, subject to possible extension.

As previously announced, Finlay, a New York-based jewelry retailer, said on May 7 that it had begun a tender offer for its $75 million outstanding principal amount of 9% debentures and that its Finlay Fine Jewelry Corp. subsidiary had begun a tender offer for its $150 million outstanding principal amount of 8 3/8% notes.

For the 9% debentures, Finlay is offering $1,031.25 per $1,000 principal amount for holders who tender by the consent deadline, or $1,011.25 per $1,000 principal amount afterward. For the 8 3/8% notes, Finlay is offering $1,029.17 per $1,000 principal amount for holders who tender by the consent deadline, or $1,009.17 per $1,000 principal amount afterward. In all cases Finlay will pay accrued interest up to but not including the date of payment.

The company is seeking consents to amend the indentures to, among other things, eliminate most of the principal restrictive covenants and certain other provisions. A majority of each series of security is needed to amend the indenture.

Holders who tender will be required to consent and vice versa. Each tender offer is subject to minimum tender conditions, a consent condition, the consents of lenders under Finlay's revolver and gold consignment agreement and the completion of an offering by Finlay Fine Jewelry of at least $200 million of new debt securities.

Credit Suisse First Boston LLC is dealer manager and solicitation agent (800 820-1653 or collect at 212 325-3784). The depositary is HSBC Bank USA. MacKenzie Partners is the information agent (800 322-2885 or collect at 212 929-5500).

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