Magazine article American Banker

Debt May Force Credit Store to Shut Down

Magazine article American Banker

Debt May Force Credit Store to Shut Down

Article excerpt

Credit Store Inc., a subprime credit card lender that specializes in purchasing defaulted portfolios and giving cardholders a chance to rebuild their credit, said Tuesday that it may have to close its operations this month and file for Chapter 11 bankruptcy protection.

According to a press statement, the Sioux Falls, S.D.-based Credit Store is facing a credit obligation that matures this month.

It says it is talking to its lenders to negotiate new funding sources or terms, and it is negotiating receivable sales. However, "there can be no assurance that these discussions will be successful."

In an 8-K filing in April with the Securities and Exchange Commission, Credit Store said that it had secured a new, one-year $3 million credit line from Plains Commerce Bank of Hoven, S.D., with an interest rate equal to prime plus 2% and secured by performing credit card accounts. The company said it expected to use the credit line for general corporate purposes, including working capital and repayment of certain maturing debt obligations.

At that time Credit Store also announced that it had recently reduced its work force by 15 employees, or approximately 5%, to capitalize on operating efficiencies and lower its operating costs.

While Credit Store's own credit may have been good enough in April to get the line of credit from Plains Commerce, that bank is not the company's only creditor. On Tuesday it said that it was talking to its various institutional creditors and possible new sources of funding looking about extending maturity dates or refinancing its debts.

"If these discussions and negotiations are not successful, the company will be unable to meet its existing obligations maturing during July and would likely be unable to continue to fund its operations by the end of the month," the company said in the press statement. …

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