Newspaper article THE JOURNAL RECORD

C.R. Anthony Bankruptcy Blamed on Credit Crunch

Newspaper article THE JOURNAL RECORD

C.R. Anthony Bankruptcy Blamed on Credit Crunch

Article excerpt


Executives at C.R. Anthony Co. and its parent have laid the blame for problems which forced them into Chapter 11 bankruptcy reorganization squarely at the doorstep of the nation's ``credit crunch.''

Much has been said nationally about this situation in the banking industry, in which would-be borrowers have been unable to obtain loans. Most Oklahoma bankers have responded by saying that, to the contrary, they are searching for loans.

The Anthonys bankruptcy filing came after Continental Bank NA of Chicago cut its $32 million seasonal line of credit which it uses to pay suppliers for new merchandise.

Anthonys executives have said the bank had the right to cut the credit line - even though the company was not behind on any payments - because Anthonys fell below a ratio of fixed charges to operating income stipulated in its $40 million financing agreement. That financing allowed the management and investor buyout of the company in 1987.

``Lenders are nervous because they are under increasingly intense scrutiny from regulators and shareholders,'' said John J. ``Jack'' Wiesner, Anthonys chairman and chief executive officer, in announcing the filing late last week.

``You can begin to see what happens to normal, reasonable business operations like ours when the banking industry gets scared and basically becomes afraid to lend money. I'm concerned this will inevitably hurt businesses all over this country and impact the lives of tens of thousands of people.''

Louis Ederington, who holds the Oklahoma Bankers Chair in Finance at the University of Oklahoma, said he was unable to draw any specific conclusions about the status of the banking industry from the Anthonys filing but said that the national credit situation is not reflective of the local situation.

``Much has been said on the national level that regulators have become so tough-nosed on loans, forcing banks to write down loans quicker and making them scared to lend,'' he said.

``I know that for banks in Oklahoma, loan demand has been weak. Banks are holding a lot of securities and not holding that much in loans. I think they are sincere in that they would really like to be making more loans than they are making,'' he said.

``I can say in general that in a recession, there is a reference to flight to quality. The spread between the most risky borrowers gets larger. The spread between the AA bond rates and the BB bond rates is tremendous. This is partly reflective of the woes of the junk bond industry, but not entirely.''

He said traditionally in a recession banks are more worried about credit quality, but from his perspective, ``Oklahoma banks would dearly love to lend.''

Wiesner said Anthonys was unsure of all the reasons the Chicago bank declined to continue their credit line when it had overlooked technical defaults in the past.

``We always knew this course of action was available to our lenders - but considering our performance, we were a bit surprised by their decision.''

He said the company had retired $24 million of the $40 million buyout debt, paid all interest to banks and bondholders on time, made all payrolls, paid suppliers and remained current on all leases and taxes. . .

- It might be interesting to note that Anthonys' lender, Continental Bank, was formerly Continental Illinois, a bank which was taken over by the Federal Deposit Insurance Corp. during the 1980s because it was considered ``too big to fail.'' The FDIC still holds about 29 percent of the bank, according to fellow Chicago banker Kenneth A. Skopec, president of Mid-Citco Inc., the holding company for Oklahoma City's Union Bank and Trust Co. …

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