NEW YORK (Thomson Financial) - Talbot's Inc. Wednesday sought to clarify the
financing developments it disclosed in a recent filing with the Securities and
Exchange Commission, saying its major vendors have agreed to "open account"
terms with payment in 45 days, an extension from a prior period of 22 days that
it expects to add about $40 million to its 2008 operating cash flow.
The company further stated that, because of the revised terms, it now
believes its financing needs with respect to its remaining smaller vendors "have
been substantially reduced" and can be met with a letter of credit line of about
$50 million.
Talbot's issued its press release amid a heavy sell-off in its shares after
filing the Form 8-K after Tuesday's closing bell. In the filing, it disclosed
that lenders HSBC and Bank of America were curtailing letters of credit activity
with the company. B of A opted not to establish a new facility after one expired
in late February and HSBC said it plans to phase out its agreement with the
company, scaling it back over the summer before cancelling it on August 8.
Even after the latest press release, the stock was off 26.5% to $9.45 in
afternoon trades. Earlier in the session, shares scraped as low as $8.57. Volume
of 7.78 million was well beyond the issue's 30-day average of 994,819.
"While the credit and financial markets are in a state of considerable flux,
we have an alternate plan in place, and have revised most of our vendor
relationships to maximize the Company's financial flexibility and greatly reduce
our need for letters of credit," said Trudy Sullivan, the company's president
and chief executive officer, in the statement.
Sullivan continued: "We are confident in the long-term benefits of these
actions as we proceed with the execution of our strategic plan."
Talbot's also noted that it still has currently available working capital
lines totaling $165 million, which it believes is sufficient to fund its working
capital needs, assuming it meets operating goals for 2008. The company now sees
operating cash flow of about $200 million for 2008.
It also expects to be compliant with all covenants of its acquisition term
loan agreement for fiscal 2008, again assuming it meets the operating plan.
Michael Baron
mb
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