Zale Corp. Jewelry Chain Files for Chapter 11

Zale Corp., the jewelry store chain that has been under pressure from its creditors, filed for voluntary protection under Chapter 11 of the U.S. Bankruptcy Code on Thursday.

In an increasingly familiar pattern among troubled companies, Zale said it arranged what amounted to a prepackaged bankruptcy in which it will receive a $510-million loan from Chemical Banking Corp. to help Zale emerge from bankruptcy later.

Zale said the filing was “a regrettable consequence” of an involuntary Chapter 11 proceeding against the company filed by four bondholders on Jan. 1.

The Dallas-based firm said it was attempting a major reorganization to decentralize the company and had hoped to reach an out-of-court settlement with the bondholders until they brought the involuntary bankruptcy proceeding. Zale said the deal with Chemical proposes a two-year term.