Ames creditor getting antsy - Citibank

Discount Store News, Dec 9, 1991

ROCKY HILL, Conn. -- Despite the closing of 77 stores in the fourth quarter or early in the first quarter of 1992, Ames Department Stores projects a small profit for the fourth quarter before taxes, interest and a restructuring charges. Chairman Stephen Pistner said that he expects a profit before those expenses of $2 million to $10 million. That compares to a loss before interest and taxes of $5 million in the fourth quarter last year.

That, evidently, is not enough for creditor Citibank, which is attempting to force Ames to accept its own reorganization plan. The banker, which is the lead creditor in Ames' $450 million credit line, appealed to a Manhattan Federal Court to accept its plan because ongoing losses have severely limited Ames' ability to reorganize. Ames refused to comment on ongoing litigation.

However, the creditors' committee, chaired by Gitano, opposes Citibank's plan, and will reportedly testify for Ames in the near future.

For the year, Ames expects an EBIT loss of roughly $90 million, compared to a loss of $300 million last year. "The anticipated reduction in our operating loss from last year of more than $200 million reflects the advances we are making in revitalizing Ames," Pistner said. "We are continuing to make progress toward our primary goal of emerging from Chapter 11 as a strong, viable and competitive company."

Pistner added that the company has borrowed less and later than in the past and anticipates repaying all lines of credit debt by mid-December. "We have continued to take early action to further reduce our operating expenses both through selective store closings and cost-cutting measures," he said. "We expect to finish the year with a 20% year-to-year improvement in our gross margin, to 26.1%, and a reduction in our inventory shrinkage of more than one-third. We have also exceeded our cost reduction expectations by $5 million."

Ames warned that investors should not rely on its projections, and said that it will release its third quarter figures, which will contain a restructuring charge for the 77 stores due to close Dec. 10. The chain now operates 371 stores, primarily in the Northeast.