Caldor stops paying its suppliers

Now in Chapter 11, retailer owes creditors who want it to liquidate

January 09, 1999|By BLOOMBERG NEWS

NORWALK, Conn. -- Caldor Corp. has stopped paying its suppliers as it tries to negotiate with creditors who want the company to sell its 145 stores.

The discount retailer, which has operated under Chapter 11 of the U.S. Bankruptcy Code since 1995, "has suspended payments for merchandise shipments and has also suspended its receipt of merchandise for which it has not paid while it continues its discussions with other creditor constituencies," said Jim Fingeroth, Caldor spokesman. He would not explain further.

Caldor has eight stores in Maryland, all in the Baltimore area.

Last year, Caldor closed its stores in Golden Ring Mall and in Westminster, along with seven in the Washington market.

The retailer's lenders have been pressuring Caldor for months to liquidate to increase their chances of being repaid in full.

And the company's suppliers, who are unlikely to receive any payment from the company for their claims, believe that the company's decision Tuesday to halt payment checks means it will liquidate soon, said Jim Rice of Bernard Sands Credit, who represents Caldor vendors.

"Normally, when there's a freeze on checks, things don't get worked out," Rice said.

In December, U.S. Bankruptcy Judge James Garrity named Ralph Mabey of LeBoeuf, Lamb, Greene & MacRae as a mediator to help Caldor and its lenders agree on a plan of reorganization.

James Rubin of Resurgence Asset Management LLC, which holds bank debt that Caldor incurred before it entered bankruptcy, said that, while many lenders want the retailer to liquidate, the company has to agree to the move.

"The more [Caldor] continues to struggle in an operating sense, the less attractive it is to a strategic acquirer," Rubin said. "And it's obviously less attractive on a stand-alone basis, which drives you toward liquidation being the highest and best source of value."

Caldor reported a loss of $16.1 million for the 13 weeks that ended Aug. 1, compared with a loss of $18 million in the corresponding period last year. The retailer has been closing stores and trying to trim operating costs in a bid to return to profitability.

In April, creditors rejected Caldor's proposal for an independent reorganization that the retailer hoped would allow it to emerge from bankruptcy.

Now, it's unlikely that the company's unsecured creditors will receive any of the money owed to them, according to a Caldor bankruptcy filing.

Rice said that, while many assume Caldor will liquidate, the company may still survive.

"I don't think the [bankruptcy] judge wants this company to liquidate," because that would leave Caldor's approximately 20,000 employees without jobs, he said, contending, "It's the vulture funds that want to liquidate, who no one likes."

Pub Date: 1/09/99

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