UPDATE: Genesco suit puts Finish Line under heel

That was the take of a Wall Street analyst this morning after Nashville-based Genesco announced it had sued Finish Line to try to force it to close the deal.

“It’s still the belief this deal gets done,” said Christopher Svezia, an analyst with Susquehanna International Group LLP in New York.

Both Indianapolis-based Finish Line and its banking firm, UBS Financial Services, have made recent public statements suggesting they’ll claim Genesco has suffered a “material adverse” effect, thus giving them the right to walk away from the deal.

Both have expressed concern about a $4.2 million quarterly loss Genesco reported in late August. UBS in recent days has asked to scour Genesco’s books to gain a better understanding of the company’s financial condition. UBS said it is putting on hold the closing of Finish Line’s loans until that work is complete.

But Genesco has balked, saying UBS wants out because turmoil in the credit markets has made the deal less profitable. Analysts say the changes also ratchet up Finish Line’s borrowing costs, perhaps leaving it with more leverage than it can handle at a time its own sales are slumping.

In today’s news release announcing the lawsuit, Genesco CEO Hal Pennington said he was tired of all the posturing.

“No more delays by The Finish Line and UBS; no more reservation of rights; no more bankers’ putting their pencils down,” Pennington said in the release. “We want a court of competent jurisdiction to enforce our rights.”

Analysts also are skeptical that the Genesco’s problems qualify as a “material adverse” effect. Rather, they say, the problems reflect of general weakness among shoe retailers.

Genesco operates the shoe retailer Journeys, Hat World and other mall retailers.

Even though many analysts believe Finish Line is boxed in to completing the deal, investors remain skeptical it will close.