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ZALE $160 MILLION DEBTOR-IN-POSSESION INVENTORY FACILITY RATED 'A' BY FITCH -- FITCH FINANCIAL WIRE --

 ZALE $160 MILLION DEBTOR-IN-POSSESION INVENTORY
 FACILITY RATED 'A' BY FITCH -- FITCH FINANCIAL WIRE --
 NEW YORK, Feb. 19 /PRNewswire/ -- Zale Corporation, in Chapter 11 bankruptcy reorganization since Jan. 26, received an 'A' rating from Fitch on a $160 million debtor-in-possession (DIP) inventory facility to be provided by Chemical Bank. The financing is expected to be approved by the bankruptcy court at a hearing scheduled for early March.
 The 'A' rating acknowledges the "superpriority" status granted to the DIP facility under bankruptcy law. This gives the lenders a priority claim over all other creditors of the company. While in Chapter 11, Zale will pay interest on the DIP facility but will not be required to service any unsecured debt incurred prior to the bankruptcy filing. This superpriority status provides the DIP facility with a strong level of investor protection.
 In assessing credit quality, Fitch recognizes that a poor retail environment during the past two years has constricted Zale's cash flow in the face of an over-leveraged capital structure. Fitch expects significant improvement in cash flow from the closing of approximately 450 unprofitable stores by March 1992, and from other management programs to reduce operating expenses and corporate overhead. The enhanced cash flows will provide healthy margins of interest coverage protection for the DIP facility. Additional protection is provided by the DIP facility's conservative loan advance rate against inventory.
 In rating DIP loans, Fitch places a high degree of importance on the quality of the loan servicer. Fitch evaluates the servicer's staff and expertise in DIP lending, and its ability to monitor the borrower's collateral. In this regard, Fitch recognizes Chemical Bank's position as a market leader in DIP lending.
 -0- 2/19/92
 /CONTACT: Wayne A. Josephson, 212-908-0559, or Thomas P. Razukas, 212-908-0557, both of Fitch/ CO: Zale Corporation ST: Texas IN: REA SU: RTG


CK -- NY093 -- 0721 02/19/92 19:36 EST
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Publication:PR Newswire
Date:Feb 19, 1992
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