Zale granted second extension on payment

Posted May 04, 2010 |

Zale Corp’s troubles are not over, after the jewellery retailer required a second extension on a $6 million penalty payment.

The penalty was issued by financial institution Citibank, relating to an exclusive credit card deal with Zale.

The deal involved US-based jewellery chain producing its own private-label credit cards for its customers, issued through Citibank.

Under the agreement, Zale guarantees Citibank a certain amount of return on the credit cards based on sales.

When Zale Corp’s sales took a well-publicised dive; Citibank was left $6 million out of pocket.

Originally set a deadline of 1 April for the $6 million payment, Zale now has until 31 May to pay back the money.

Zale is also fighting to keep its exclusive credit card arrangement with Citibank, which expires in March 2011.

The news comes after last week’s reports that Zale had found a potential investor. Reports suggested the pending deal with private equity firm Golden Gate Capital would spell an end to Zale Corp’s financial troubles.

One week on, a deal has yet to be finalised, and investors appear to be getting nervous.

Zale shares dropped 3.8 per cent on Friday, when the extension was announced.

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