Mervyns’ credit approval for $40 million in orders has been withdrawn by CIT Group Inc.
This story first appeared in the May 6, 2008 issue of WWD. Subscribe Today.
CIT has been hit hard by the subprime mortgage crisis fallout, which forced the lender to sell assets and borrow $7.3 billion to repay debt and provide financing. The company posted a first-quarter loss, hurt by its home and consumer lending divisions, and cut its dividend 60 percent.
The pullback by CIT is the latest move by a lender to tighten credit for retailers. Last month Sears Holdings Corp., Talbots Inc. and Coldwater Creek Inc. all said that major lenders had stopped approving credit facilities.
Mervyns LLC, the Hayward, Calif.-based promotional department store chain, said none of its other major factors or vendors have pulled back lending.
“In fact, some of the factors have reached out to us to expand their business with Mervyns,” said company spokesman Roy Burces.
Only one-fifth of Mervyns’ business is supported through factors, and the company said it is comfortable with its liquidity position.
Mervyns last month named John Goodman, a Levi Strauss & Co. executive, to be president and chief executive officer. Rick Leto resigned in December after three years as ceo. Chuck Kurth, executive vice president and interim ceo, has taken on the mantle of chief administrative and financial officer,
The midtier retailer has cut 315 jobs and closed more than 80 locations.
Sun Capital Partners Inc. bought Mervyns in September 2004 with the help of Cerberus Capital Management LP and Lubert-Adler and Klaff Partners LP. It was previously owned by Target Corp.