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Vendors, Bond Raters Skittish Over Broadway : Retailing: Stock drops, some shipments halted as pressure mounts on company to find buyer for out-of-state stores.


Some vendors have put merchandise deliveries to Broadway Stores Inc. on hold and a major credit-rating agency on Monday downgraded the company's bonds as pressure mounted on the Los Angeles-based retailer to find a buyer for 11 out-of-state stores.

Shares of Broadway Stores lost nearly half their value Monday following reports that manufacturers and financiers have cut off credit. The stock closed at $1.625, down $1.375 in trading on the New York Stock Exchange.

Shares, which have traded as high as $12.25 in the past 12 months, had fallen 50 cents on Friday. That drop prompted the company to issue a statement reiterating plans to shore up its financial position by selling the 11 out-of-state stores in its Southwest division, properties placed on the auction block in April.

"In response to inquiries, Broadway Stores . . . cannot explain downward pressure on its stock price," the company said.

Some industry analysts were also mystified by the developments. Negative rumors about the company--including speculation that the retailer for the second time in four years may file for bankruptcy protection--stem from sudden concern that Broadway has not yet sold the non-California stores, said Thomas Friedberg, an analyst at Genesis Merchant Group in San Francisco.

"Broadway Stores is not in default of its loan agreements," Friedberg said. "There's too much panic out there. Broadway Stores is not going to sell their [store] assets short. There's no reason to sell them for less than their value."

Moody's Investors Service cut its rating on Broadway's $144 million of senior convertible subordinated debentures from Caa to Ca, a rating reserved for only the most speculative of bonds that are still paying interest. Moody's said the outlook remains negative.

The inventory of Broadway and other retailers is underwritten by factors, financiers who provide funding for merchandise. Currently, factors for Broadway are withholding financing pending future developments, said Howard Raab, president of Park Avenue Transglobal Financial Services, a Los Angeles-based commercial credit service.

"If they can sell the store properties quickly, they'll be fine," Raab said.

San Francisco-based clothier Esprit de Corp. said in a statement Monday afternoon, "While we are not shipping goods to Broadway today, it is our goal to work with their management group to resolve credit and financial issues and resume shipping at the earliest possible date."

Some vendors are withholding orders because they are concerned about Broadway's ability to survive long-term in an increasingly competitive environment, said Kurt Barnard, a New Jersey-based retail economist.

"Vendors' decisions to withhold shipments is not a reflection of the company's ability to pay bills," Barnard said. "It's an indication of a lack of confidence."

Broadway Stores has struggled since emerging from bankruptcy reorganization in 1992. The company's performance during its most recent financial quarter was worse than expected. During that quarter, which ended April 29, the company had a loss of $43.3 million.

Broadway last week announced that the company had reached an agreement to sell its only property in Colorado, a Southwest division store in Denver.

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