Retail Ventures warns of Filene's liquidity risk
today Feb 13, 2009
SAN FRANCISCO, Feb 13 (Reuters) - Retail Ventures Inc (RVI.N) said on Friday that it had made an agreement with lenders to provide additional funds for its Filene's Basement chain, but warned the chain may require additional cash.
Retail Ventures, which also is the parent of shoe retailer DSW Inc (DSW.N), has been exploring strategic alternatives to address a liquidity risk at the company and at its Filene's Basement unit. Last month, it said some Filene's stores would close by the end of this month.
The company said it had entered into an agreement with National City Business Credit Inc, its agent, to provide $7.5 million to fund overadvances beyond the agreement's borrowing base.
Overadvances are funds in excess of the maximum amount allowed under a loan agreement. Typically, they are obtained so that companies can get extra funds from their lender to build inventory ahead of a sales season.
Filene's lenders are National City, Wells Fargo Retail Finance LLC and Wachovia Capital Finance Corp.
But Retail Ventures warned that the overadvances may not be enough.
"The company believes that for Filene's Basement to satisfy its obligations as they come due, Filene's Basement may need additional liquidity beyond these permitted over advances," said the company in a filing with the U.S. Securities & Exchange Commission.
The company said it was not required to provide additional funding to its Filene's unit beyond the $7.5 million.
Retail Ventures also cautioned that if the revolving credit lenders seek repayment, it currently does not have sufficient liquidity to immediately satisfy that repayment without a transaction to raise capital.
"Although such a capital raising transaction could include the sale or collateralization of shares of common stock of DSW Inc or a sale of equity by the company, no assurance may be given that any such transaction can be successfully pursued or timely consummated," the company said.
Shares of Retail Ventures closed down 5 cents, or 2.2 percent, on the New York Stock Exchange to $2.22 on Friday. (Reporting by Alexandria Sage; editing by Carol Bishopric)
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