Zale Considering Selling Stake to Golden Gate Capital

Struggling jewelry retailer Zale may sell a minority stake to Golden Gate Capital Corp., Bloomberg reported Wednesday, quoting two people familiar with the decision. Zale received a number of offers, according to the sources, that stressed that a final deal may not materialize.

Following the poor holiday results, Zale’s top executives left the company, and its board of directors started looking for an infusion of cash. Golden Gate’s offer was selected over proposals from Centerbridge Capital Partners LLC and TPG, as part of the cash-seeking process.

Zale has recently warned that based on its cash flow projections for the remainder of 2010, “We may not have sufficient liquidity to meet our operating needs.”

It went on to warn that Citibank may stop providing customer credit for purchases with the consequences being “material” and likely to impact Zale’s ability to continue to operate.

Last month Zale's board rejected Apollo Management’s proposal to buy a stake in the jeweler and sell Zale's Canadian operations to raise needed cash to run the business. At the time, it was reportedly seriously considering another less ambitious financing proposal from Sun Capital Partners Inc.