NEW YORK (Thomson Financial) - Shares of Talbot's Inc. were battered early
Wednesday following its disclosure that HSBC is no longer prepared to continue
making letter of credit facilities available to the company. In addition, in a
Form 8-K filed after Tuesday's closing bell, the company said that Bank of
America has determined it won't provide a new facility or allow new drawings on
an existing $130 million letter of credit that expired on Feb. 23.
The stock was down 22.3% to $9.99 in morning action, putting it atop the
percentage decliners list on the New York Stock Exchange. Volume of 1.35 million
was already above the issue's 30-day daily average of 994,819.
In the 8-K, the Hingham, Mass., apparel retailer said HSBC made its
notification on April 9. The notification followed a reduction in the prior
letter of credit facility limit to $60 million from $135 million on April 8.
HSBC now plans to phase out its commitment to Talbot's, lowering the limit to
$45 million on May 8 then $30 million on June 9 to $15 million on July 8 until
the facility is cancelled on August 8.
Talbot's, which also disclosed an extension of its $18 million revolving
credit agreement with Mizuho Corporate Bank Ltd. to April 10, 2010, said it has
recently negotiated 'open account' payment terms with the majority of its
current merchandise vendors and that it may pursue similar deals with other
vendors. It also plans to pursue new letter of credit agreements with other
lending sources.
If it's not able to secure new letter of credit agreements, Talbot's said it
plans to purchase inventory "without utilization of letters of credit, subject
to the availability of cash on hand."
On March 12, the company reported its unaudited fourth-quarter results,
posting a loss of $171 million, or $3.23 a share. At that time, it said cash and
cash equivalents stood at $25.48 million as of Feb. 2.
Michael Baron
mb
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