BRENTWOOD, Tenn. -- Service Merchandise Co., a troubled jewelry and home-products retailer, said the company obtained $750 million in financing and chief executive Gary Witkin abruptly quit as it struggles to pay lenders.
The company said it will use the financing from Citigroup Inc.'s Citibank unit to improve operations and repay bank loans and debt obligations. Last month, it failed to make a $13.5 million bond interest payment, triggering a default.
Sales have slumped and the company has been trying to attract customers by shifting to traditional stores from catalog stores.
"If we can meet our operational and financial challenges -- and we're off to a great start with the new financing commitment -- we think we can return the company to profitability," Raymond Zimmerman, who was named non-executive chairman, said in a statement.
Shares of Service Merchandise doubled on the news, rising 40.625 cents to 81.25 cents, in trading of 9 million, about six times the three-month daily average. The shares have declined about 60 percent in the past year.
The company expects to close its financing facility this month, and said it plans to pay the interest due on its 9 percent subordinated debentures by Thursday. Standard & Poor's Corp., the debt-rating company, cut its credit rating on the notes to "D" -- or default -- when the company missed the Dec. 15 payment.
Witkin, 50, stepped down to pursue other interests, the company said.
Service Merchandise employs about 25,000 workers at 347 stores in 34 states.
Pub Date: 1/09/99