Caldor Lenders Expected to Recoup Their Capital

By Weidner, David | American Banker, January 26, 1999 | Go to article overview

Caldor Lenders Expected to Recoup Their Capital


Weidner, David, American Banker


By DAVID WEIDNER

Lenders holding loans to Caldor Corp., the failing discount retailer, are likely to recover their investment, say bankers familiar with bankruptcy lending.

Loans to Caldor, which announced plans Friday to close its remaining 145 stores, were secured by the retailer's inventory and real estate. The Norwalk, Conn.-based company reported assets of $1.05 billion in a third- quarter filing with the Securities and Exchange Commission.

That is good news for BankBoston Corp., which in May put together for Caldor a $450 million syndicated line of credit available through November of this year. Caldor, the nation's fourth-largest discount department store, was mired in the third year of a bankruptcy struggle and desperately seeking cash to fend off creditors.

Joining BankBoston was a group that included CIT Group, GE Capital Corp., Congress Financial Group, Finova Capital Corp., and Heller Business Credit Corp.

Last week Caldor failed to convince these lenders that its long string of losses would end. It said it would eliminate 20,000 jobs and cease operations.

When backing the company in May, the lenders argued that after a strong fourth quarter in 1997, Caldor was on the rise. It had a new five-year business plan and a target of emerging from bankruptcy protection in less than a year.

But in the ensuing months, Caldor's financial picture followed a familiar pattern, analysts say. Vendors pressured the company to pay in cash. Store shelves were void of some products. Losses mounted.

By December, Caldor reported it had not met the financial targets required by the loan agreement. Negotiations with lenders began. In early January a newspaper reported that the company had sold leases on 64 stores to competitors such as Kohls, Kmart Corp. …

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