Home & Textiles Today Staff -- Home Textiles Today, May 28, 2001
Lechter's lines up financing
Financially limping housewares retailer Lechter's Inc. said it has lined up $86 million in debtor-in possession (DIP) financing after filing for Chapter 11 bankruptcy protection from its creditors last week.
Lechter's, based in Harrison, NJ, said that as part of a sweeping overhaul of operations it will close slightly more than half of its stores, 166 out of 325 now in operation, and reduce its work force by 30 percent. As part of a broad restructuring, Lechter's is trying to shift its base of operations away from a broad assortment of kitchen gadgets, bathroom and cookware products, to a more focused assortment of upgraded kitchen goods.
To meet its payroll and pay for new merchandise, Lechter's said it has lined up the $86 million in DIP financing from a group of existing lenders, including Fleet Retail Finance Inc. and Back Bay Capital Funding. The fresh injection of cash, the retailer said, "will provide vendors with the assurance that they will be paid for post-petition invoices."
Anxious vendors had shut off credit and halted shipments to the retailer, triggering the bankruptcy, said David Cully, president and ceo. "Unfortunately, concerns about the company's financial position have precluded us from receiving the trade credit necessary to implement our strategy and this, in turn, has impacted our liquidity."
As of May 4, Lechter's recorded assets of about $129 million, and liabilities of $111 million.
Lechter's said the bankruptcy filing in U.S. Bankruptcy Court for the Southern District of New York "will establish a mechanism for restructuring the company's debt and the claims of landlords for stores closed as part of the company's strategic restructuring plan."
Penney debt downgraded, again
Pointing to "persistent operating weakness" in JC Penney's core department store business and its Eckerd drugstore operations, Fitch Investors Service has become the third major debt rating agency to downgrade about $5.4 billion in Penney debt in the past several weeks, following earlier ratings cuts by Moody's and Standard & Poor's.
Penney notes and bonds were cut from 'BBB-' to 'BB+', and Penney Funding Corp's commercial paper program was downgraded from 'F3' to 'B'. The retailer's ratings outlook was described as 'negative.'
"The department stores have struggled to gain sales traction in the increasingly competitive middle market," said Fitch. "At the same time, Eckerd's profitability has been hampered by poor execution and pressure from managed care in its growing drugstore operations."
Moreover, said Fitch, the retailer's "credit measures continued to weaken in 2000," with cash flow slipping to 1.4 times interest expense and rents from 1.5 times in 1999. "While these levels are weak for the rating category," said Fitch, it expects them "to rebound over the medium term as debt levels are reduced and profitability and cash flow improve."
On a positive note, Fitch said, "the 1999 sale of its credit card receivables and improving free cash flow have strengthened Penney's balance sheet and liquidity."
Federated okays stock buy-back
Still working hard to drive its share price higher, Federated Department Stores has authorized the buy-back of up to $500 million more of its common stock.
The latest move is in addition to an existing stock repurchase program which has about $250 million more of authorized spending remaining.
Federated shares traded last week at about $48.30 a share, only slightly off their 52-week high.
Related Content By Author
Industry Related Content
H&TTtv Talks Outdoor Rugs