MONTGOMERY WARD’S LOSSES ARE MAKING FACTORS UNEASY

NEW YORK — With Montgomery Ward & Co. facing huge losses in the first and second quarters of this year on top of last year’s $237 million loss, factors are taking steps to further lighten their exposures.
While factors have been working out arrangements to share the risk on shipments to Ward for some time, they are increasing the clients’ portion. Some factors now are reportedly requiring clients to take as much as 40 percent of the risk on Ward shipments. Others require the client to accept the first 25 or 35 percent of the loss.
In addition, most factoring firms are limiting shipments to the near term and not going out beyond May. The retailer has been paying its current bills on time, according to the factors.
Ward’s has notified factoring firms that it expects to lose $140 million in the first quarter of this year and another $108 million in the second quarter.
One factoring executive said these losses do not include costs of store closings that are expected this year. He added that with the losses projected by Ward’s and the cost of store closings, “Ward’s entire equity will probably be wiped out.”
At the end of l996, Ward’s equity had dropped to $532 million from $782 million a year earlier.
According to reports, Arthur Andersen & Co. has been surveying the 400 Ward’s stores to determine which should be closed. An announcement is expected shortly on store closing decisions.
While any store closing program would result in book losses, the process would generate much needed cash flow and remove the source of operating losses, according to one credit expert. He also pointed out that Ward’s is expected to work out new financing when a $455 million credit line expires on Aug. 28.
In a statement, Roger Goddu, chairman and chief executive officer of Ward’s, acknowledged the company has a tough job ahead, saying, “We are actively putting programs into place to begin our turn around process. It should come as no surprise that 1997 will be a difficult year as we finalize the strategic plans and implement the repositioning of the company.”

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